employment contracts

Employment Contracts – Cambridge A‑Level Business (9609)

1. Syllabus Mapping – where the contract material fits

Syllabus Unit (AS)	Key Sub‑topics	Notes / Section in these notes
1. Business & its environment (1.1‑1.5)	Enterprise, business structure, size, objectives, stakeholders, external influences	Section 2
2. Human Resource Management (2.1‑2.3)	Workforce planning, recruitment & selection, training & development, motivation, employee relations, trade unions, employment contracts	Section 3 (HRM overview) and Section 4 (Employment Contracts)
3. Marketing (3.1‑3.3)	Market research, segmentation, 4 Ps, product life‑cycle, pricing, promotion, digital marketing	Section 5
4. Operations Management (4.1‑4.3)	Transformational process, productivity, inventory control, capacity utilisation, outsourcing	Section 6
5. Finance & Accounting (5.1‑5.5)	Need for finance, working capital, sources of finance, cash‑flow forecasting, costing, break‑even, budgeting, variance analysis	Section 7
A‑Level extensions (6‑10)	Strategic analysis, organisational structure, leadership, advanced marketing, operations strategy, financial statements, ratio analysis, investment appraisal	Section 8 (preview)

2. Business & its Environment (Unit 1)

• Enterprise: creation of goods or services to satisfy needs; can be profit‑making or non‑profit.
• Business structure: sole trader, partnership, private limited company (Ltd), public limited company (PLC); each has different ownership, liability and decision‑making characteristics.
• Size & scale: micro, small, medium, large – measured by turnover, staff numbers or assets.
• Objectives: profit maximisation, growth, market share, corporate social responsibility (CSR); often expressed as SMART (Specific, Measurable, Achievable, Relevant, Time‑bound).
• Stakeholders: owners, employees, customers, suppliers, government, community, creditors; each influences and is influenced by business decisions.
• External influences: economic (inflation, exchange rates), legal (regulation), technological, social, environmental, political (PESTLE).

3. Human Resource Management Overview (Unit 2)

3.1 Workforce Planning & Turnover

• Analyse current labour supply vs. future demand (skills audit, forecasting).
• Turnover cost components: recruitment, training, lost productivity.

3.2 Recruitment & Selection (2.1.3)

• Internal vs. external recruitment; methods (advertising, agencies, online portals).
• Selection tools: application forms, CVs, psychometric tests, interviews, assessment centres.
• Legal considerations – equality legislation, right to work checks.

3.3 Training, Development & Multi‑skilling (2.1.6)

• Induction, on‑the‑job training, apprenticeships, e‑learning.
• Career development, succession planning, continuous professional development (CPD).

3.4 Motivation & Welfare (2.2)

• Motivation theories: Maslow’s hierarchy, Herzberg’s two‑factor, McClelland’s achievement, Vroom’s expectancy.
• Motivational methods: pay for performance, job enrichment, employee involvement, work‑life balance initiatives.

3.5 Employee Relations & Trade Unions (2.1.7)

• Collective bargaining, industrial action, grievance handling.
• Legal framework: Trade Union and Labour Relations (Consolidation) Act 1992.

3.6 Employment Contracts – the core of this chapter (see Section 4)

4. Employment Contracts – detailed study

4.1 Why do employers use contracts?

• Legally bind both parties to agreed rights and duties.
• Provide a clear framework for performance management, pay, disciplinary and grievance procedures.
• Reduce the risk of misunderstandings and costly disputes.
• Form the basis for applying statutory employment rights (minimum wage, holiday entitlement, etc.).

4.2 Benefits and limitations of a written contract

Benefits	Limitations
Clarity – both parties know exactly what is expected. Legal protection – easier to enforce rights in tribunals. Facilitates performance management, career planning and budgeting. Provides evidence of statutory compliance.	Can be rigid – difficult to adapt quickly to changing business needs. Drafting costs – legal advice may be required. May give a false sense of security if terms are vague or contradictory. Over‑reliance on the contract can undermine informal trust‑building.

4.3 Key elements that must appear in every contract (minimum legal requirements)

• Job title and description – role and main duties.
• Place of work – primary location and any mobility requirements.
• Hours of work – normal weekly hours, shift patterns, overtime rules.
• Pay and benefits – salary or wage, bonuses, pension, holiday entitlement, sick pay, etc.
• Notice period – length of notice each side must give to end the contract.
• Probationary period – initial period for assessing performance.
• Confidentiality and non‑compete clauses – protection of business information and post‑employment competition.
• Disciplinary and grievance procedures – how conduct issues are dealt with.
• Statutory rights – minimum rights under UK law (e.g., minimum wage, paid leave, sick pay, redundancy).

4.4 Types of employment contracts

Contract type	Typical duration	Key features
Permanent (open‑ended)	Indefinite	Full employee rights, continuous employment, usually includes pension, paid leave and redundancy entitlement.
Fixed‑term	Specified period (e.g., 6 months, 2 years) or until a project finishes	Ends automatically on the agreed date; rights similar to permanent staff while the contract lasts.
Temporary / agency	Short‑term, often weeks to months	Employed by an agency; host company directs work; limited benefits and usually no redundancy pay.
Zero‑hours	Indefinite, but no guaranteed hours	Employee works only when needed; flexible for employer, income insecurity for employee.
Casual / on‑call	Indefinite, irregular	Ad‑hoc work; often paid at a higher hourly rate to compensate for lack of regular hours.

4.5 Legal requirements (general, not UK‑specific only)

1. Written statement of employment particulars must be given within two months of the start date (Employment Rights Act 1996, s.1 – UK example).
2. Contract terms must not be unlawful – no discrimination on the basis of protected characteristics (e.g., age, gender, disability).
3. Statutory minimum wage / national living wage must be observed.
4. Working Time Regulations limit average weekly hours to 48 hours unless the employee opts out.
5. Paid annual leave – minimum 5.6 weeks (including public holidays) in the UK; similar minima exist in most jurisdictions.
6. Health & safety duties apply to both employer and employee.
7. Employees are entitled to a written contract (or written statement) that reflects all statutory rights.

4.6 Statutory employment rights that must be reflected in the contract

• National Minimum Wage / National Living Wage.
• Paid annual leave and public‑holiday entitlement.
• Statutory sick pay and maternity/paternity/parental leave.
• Redundancy pay (for qualifying employees).
• Protection against unfair dismissal after two years of continuous service (UK) – many systems have a comparable qualifying period.
• Right to a written statement of terms and conditions.

4.7 Redundancy

Redundancy occurs when a role is no longer required for business reasons (e.g., restructuring, technological change).

• Statutory redundancy pay – calculated on age, length of service and weekly pay (subject to a statutory cap).
• Consultation – employer must consult individually (and collectively if ≥20 employees are affected) before dismissing.
• Selection criteria – objective measures such as attendance, skills, disciplinary record, performance.
• Alternative employment – employer must consider offering suitable alternative roles where possible.
• Notice pay – employees receive pay in lieu of notice if the contract is terminated without the required notice period.

4.8 Dismissal and termination

Type of dismissal	Definition	Key legal considerations
Summary dismissal	Immediate termination without notice for gross misconduct.	Employer must have a clear, documented policy; employee entitled to a fair hearing before dismissal.
Fair dismissal	Termination after proper procedure for reasons such as capability, conduct, redundancy or statutory restriction.	Procedural fairness (investigation, warnings, opportunity to improve) and substantive fairness (reasonable reason).
Unfair dismissal	Dismissal that breaches the fairness test after the qualifying period of continuous service.	Employee may bring a claim to an employment tribunal; possible remedies include reinstatement, re‑engagement or compensation.
Constructive dismissal	Employee resigns because the employer’s breach of contract is so serious that they can no longer work.	Employee must prove the breach and that resignation was a reasonable response; treated as an unfair dismissal claim.

4.9 Advantages and disadvantages – employer vs. employee

Perspective	Advantages	Disadvantages
Employer – Permanent	Stability, loyalty, lower turnover costs, easier workforce planning.	Higher long‑term salary costs, less flexibility to adjust staff numbers quickly.
Employer – Fixed‑term	Flexibility for project work; access to specialist skills for a set period.	Potential higher recruitment costs if contracts are repeatedly renewed; risk of “permanent” fixed‑term abuse.
Employer – Zero‑hours	Maximum flexibility; pay only for hours worked; reduced idle labour costs.	May affect morale, increase turnover, and attract negative publicity.
Employee – Permanent	Job security, full statutory benefits, career development opportunities.	Less flexibility to change jobs quickly; may feel “locked in”.
Employee – Fixed‑term	Clear end date, experience on specific projects, often higher pay rates.	Uncertainty after contract ends; limited access to some benefits (e.g., redundancy).
Employee – Zero‑hours	Ability to combine work with study or caring responsibilities; higher hourly rates can offset irregularity.	Income instability, limited statutory rights such as redundancy pay.

4.10 Example of a simple contractual clause

Confidentiality
The employee shall not, during or after employment, disclose any confidential information
relating to the Company’s business, customers or suppliers without prior written consent.
Breach of this clause may result in disciplinary action up to and including summary dismissal.

4.11 Revision diagram (employment‑cycle flow)

5. Marketing (Unit 3 – brief overview)

• Market research: primary vs. secondary data; qualitative & quantitative methods.
• Segmentation, targeting, positioning (STP): demographic, psychographic, geographic, behavioural criteria.
• The 4 Ps: Product (life‑cycle, branding), Price (strategies, price elasticity), Place (distribution channels, logistics), Promotion (advertising, sales‑promotion, public relations, digital).
• Digital marketing: SEO, social media, email campaigns, e‑commerce platforms.

6. Operations Management (Unit 4 – brief overview)

• Transformational process: inputs → transformation → outputs; importance of quality control.
• Productivity & efficiency: output per unit input; techniques such as lean production and Six Sigma.
• Inventory control: Just‑in‑Time (JIT), safety stock, Economic Order Quantity (EOQ).
• Capacity utilisation: measuring output vs. maximum possible output; strategies to increase capacity.
• Outsourcing & off‑shoring: cost benefits, risk considerations, impact on quality.

7. Finance & Accounting (Unit 5 – brief overview)

• Need for finance: start‑up capital, working capital, expansion.
• Sources of finance: internal (retained earnings, owner’s equity) and external (bank loans, overdrafts, leasing, equity finance, government grants).
• Cash‑flow forecasting: importance for liquidity; methods (direct, indirect).
• Costing methods: absorption costing, marginal costing, activity‑based costing.
• Break‑even analysis: fixed costs, variable costs, contribution margin; use of CVP (cost‑volume‑profit) charts.
• Budgeting & variance analysis: flexible vs. static budgets; favourable/unfavourable variances.

8. A‑Level Extensions – preview (Units 6‑10)

• Strategic analysis: SWOT, PESTLE, Porter’s Five Forces, Ansoff Matrix.
• Organisational structure & culture: hierarchical, matrix, flat; impact on decision‑making.
• Leadership & change management: leadership styles, Kotter’s 8‑step model, resistance to change.
• Advanced marketing: market positioning, brand equity, relationship marketing, digital analytics.
• Operations strategy: process choice, location decisions, supply‑chain management.
• Financial statements & ratio analysis: income statement, balance sheet, cash‑flow statement; liquidity, profitability, efficiency ratios.
• Investment appraisal: payback period, net present value (NPV), internal rate of return (IRR), risk analysis.

9. Quick‑reference checklist for an employment contract

1. Job title, description and place of work
2. Hours of work, shift patterns and overtime provisions
3. Pay (rate, frequency) and benefits (pension, bonuses, holiday, sick pay)
4. Notice period and probationary period
5. Confidentiality / non‑compete clauses
6. Disciplinary and grievance procedures
7. Statutory rights (minimum wage, holiday, sick pay, redundancy, unfair dismissal)
8. Signature of employer and employee with date