Are HR Policies Contractual?

Whether an HR policy is contractual depends on the policy, the organisation, the law and the contract of employment.

In all cases, it should be easy for both staff and managers to determine whether something is contractual or not. The first place to look for contractual clauses is the contract of employment.

The contract of employment is the most essential document when employing staff. It needs to be given to the employee on or before the first day of employment. It may take one of two formats:

  • A full contract of employment which specifies all the contractual terms
  • A statement of main terms and conditions which, if written properly, will refer the reader to further policies as required.

If any part of the contract or the statement are not contractual, it must explicitly state this. Examples may be the company disciplinary or grievance policy. Sometimes they are included as an addendum rather than in the actual contract – this just makes it even clearer that the policy is not contractual.

In addition, a lot of businesses will have an employee handbook and / or separate stand-alone policies. It is up to the company to decide whether or not the handbook and / or policies are contractual and it should be clearly stated on each document. It is common for the first section of a handbook to be contractual and the second section non-contractual.

It is not essential to have an employee handbook. The employee handbook really becomes effective once you have multiple sites or multiple managers. The purpose of the handbook is to provide clarity, consistency and to communicate policies and procedures to all employees in the same way over time. While a business is small, it is easy for a business owner to do this. Once the business starts to grow and has 10+ employees, the handbook becomes a tool by which to manage.

While the business is growing, it may need specific policies to meet the business needs. Again, it will be up to the business to determine whether the contents is contractual or not.

Most employers will keep contractual policies to a legal minimum so that changes can be made easily. If a policy is contractual, the business is required to consult with all employees and obtain approval before any changes are made to the policy. If a policy is non contractual, the changes must be communicated, but as a general rule, do not need to be consulted on.

How a company defines the legal minimum will again depend on the company. If they are giving salary, benefits, time off, sickness pay etc. these are all legal contractual requirements. A company may also include restrictive covenants, intellectual property, data protection and health and safety clauses as these are policies written to protect the business which the employee is required to expressly commit to.

In some organisations, the whole handbook and therefore all HR policies are contractual and no changes can be made without full consultation.