Q. I have been running my own business for two years and am looking to take on my first employee, how do I go about writing a legal contract and how much does it cost?

A.It is absolutely crucial to set up a contract, which sets out the arrangements between the employee and employer in detail. Many small businesses make the mistake of not giving this enough importance and write sketchy and vague contracts. The employer needs to be careful that the offer letter and contract reflect what has been agreed with the employee. While it might be tempting to avoid lawyers’ fees and instead write contracts yourself using free templates that are available on the internet, they often do not go into enough detail. Employers might end up amending the contracts themselves, which could come back to bite them in the future. It is always advisable to seek legal advice when drafting a contract, as correct phrasing is crucial when it comes to legal documents. For a bespoke contract you can expect to pay anything between £800 and £5,000, depending on the level of detail and complexity.

Q. What are the main points I should include in the contract and is there anything I should be aware of?

A.The contract itself does not have to be complicated but it will need to include a few key points. These include the job description, pay, hours, holiday, sickness arrangements and termination provisions. Again, wording is very important to prevent discrepancies or ambiguities. Financial institutions, for example, should take special care when including bonuses in an employment contract. This could lead to an employer being legally bound to pay an employee a bonus even if they haven’t performed well. So, for both parties, it’s best to be clear what bonus and terms of employment both the employee and employer can expect. Other points to be aware of are the maternity, paternity and parental leave rights of employees and a duty to provide a pay slip. Thankfully, for small business owners there are many places that you can get information on employment law, such as the department for businesses, innovation and skills and the ACAS websites, alongside HR advisors and lawyers.

Q. How can I protect myself from being sued in case I need to let someone go?

A.The most important thing is to be clear why you are letting someone go, as well as having a clear process to regularly check your employees’ performance. If you are dismissing someone, it is vital to be up front and honest. For example, many employers hide behind redundancy, when the real reason may be poor performance. Small companies can protect themselves by having a probationary period in which the employee can be monitored and informed about their progress. The employer should take time to discuss performance-related issues regularly, and not shy away from uncomfortable discussions. In the case of redundancy, it is sensible to seek legal advice as it can be a relatively complex process, and it is important to follow the correct set of laws in order to minimise the risk of a dispute.