Settlement agreement

What is it?

A Settlement Agreement is a binding contract between an employer and employee which settles claims that an employee may have against their employer. Whilst such an agreement is usually used in relation to be ending the employment it may also be used to settle a dispute that has arisen between an employer and employee where there is no intention by either party to end the employment.

Why is it important?

The terms of the settlement agreement must be mutually agreed between the employer and employee and must include a waiver of the specific claims which the employee has or could have. The agreement should contain a breakdown of the payments which have been agreed and should also state whether any of the payments are to be paid to the employee free of tax. Payments of up to £30k compensation can often be paid without deduction of tax if the payment is being made on an “ex gratia basis” (i.e. it is a payment you have voluntarily decided to make rather than one that you are legally obliged to make) or as compensation damages for a breach of contract.

Risks?

For a settlement agreement to be legally binding it must meet a number of statutory requirements eg it must be in writing, must specify the particular claims or complaints which the agreement is settling and the employee must have received advice on the terms and effect of the agreement from an independent solicitor or a trade union official whose advice is covered by insurance.

If the settlement agreement does not meet all of the statutory requirements, it will not be binding and the employee can still bring claims against the employer relating to the claims allegedly “settled” by the settlement agreement.It is a good idea to take proper legal advice before you decide to enter into a settlement agreement.

Reference letter

What is it?

A Reference letter is a letter that is usually written to testify to a person’s or (sometimes) a company’s skills, experience, character and or achievements. It is used in various circumstances eg when a candidate applies for a job and needs a reference to support their application, if a job candidate is made a job offer and is asked to provide a reference letter before the contract can be signed, a landlord asks a prospective tenant to provide a reference letter testifying to their character and good financial statues, a student applies for funding and is asked to provide a reference letter or a company applies for a tender and is asked to provide reference letters testifying to their ability to do the job and their trustworthiness.

Why is it important?

A Reference letter is a formal document and should be written in a business-like style. Do not mention any weaknesses that the candidate has or say anything that could be construed as derogatory or libel. If you honestly feel that the applicant has no good qualities or if you have had a dispute with them in the past you should tell them to get a reference letter from someone else. An employer must give a reference if there was a written agreement to do so and they are in a regulated industry such as Financial services.

Risks

You are under no obligation to give a work reference but if you do it must be fair and accurate. Your employee may be able to sue you in court and claim damages if you give a reference, they think is misleading or unfair. To do so the employee must be able to show that (a ) the reference is misleading or inaccurate and (b) they suffered a loss eg a job offer was withdrawn.It is essential that you do not lie in it or you could be sued.

Need some advice? Contact our employment solicitors.

Consultancy agreement

What is it?

A consultancy agreement is a contract between a self-employed person (Consultant) and a customer requiring the consultant’s services.

It is similar to the standard contract used to hire a freelancer. This agreement clarifies the basic terms of your relationship with the freelancer eg the work to be done, fees payable and other terms of the agreement eg a non-solicitation clause, confidentiality clause, data protection, ownership of any intellectual property created by the freelancer, indemnification clause for any losses you incur due to the freelancer’s breaches of third party intellectual property. Etc.

Why is it important?

More specialist freelancers may want you to sign up to their own bespoke terms and conditions when you instruct them. If that is the case you must ensure that you check all the clauses carefully to ensure that they do not conflict with your requirements and that you are happy with the terms eg consultant to be liable for breaches of your Intellectual property and third party intellectual property, confidentiality, fee payable, data protection, indemnification clause etc.

Risks

You should also ensure that you are aware of the IR35 tax rules. If a freelancer is providing services to you through a company your arrangement may be subject to the IR35 tax rules. This means that the freelancer may have to pay tax and national insurance as if they were employed by you. HMRC has a useful tool at www.gov.uk to enable businesses check employment status for tax purposes.

From April 2020 if you are a medium or large business the responsibility for determining whether the IR35 tax rules applies to the consultancy and for payment of the income tax and national insurance on behalf of the freelancer lies with the company to whom the freelancer provides the services. If you are a “small business” (i.e. a business which satisfies two or more of the following requirements – i) a turnover of £10.2 million or less, ii) no more than 50 staff and iii) a balance sheet f no more than £5.1million the responsibility for determining whether the IR35 tax rules apply and for payment of the tax and national insurance lies with the freelancer.

Home/Office rental agreement

What is it?

A home office rental agreement is an agreement between an owner or lessee of property to share their home office space with another person. These agreements are usually used by start-ups and home-based businesses and will be in the form of a licence agreement. The licensor will be the owner or tenant of the property and the licensee will be the sharer who may be an individual or a company. If more than one individual sharer it is essential that they be all named on the agreement so that they remain jointly and severally liable under the rental agreement. The licence fee should be inclusive of the service costs eg internet, utilities, etc.

Risks

If your business is a lessee, you must check your lease and check with your landlord to ensure that the grant of a licence to the sharers will not be a breach of your obligations as a tenant.

Purchase order

What is it?

A purchase order is prepared by a buyer when the buyer orders goods or A purchase order is prepared by a buyer when the buyer orders goods or services from a seller. The purchase order will indicate the type of goods, quantity of goods and the price the buyer is willing to pay for the products and or services.

Once the seller accepts the purchase order it becomes a legally binding contract as the seller has agreed to sell the goods and or services at the prices put forward by the buyer. The seller will then issue an invoice to the buyer based on the purchase order.

Why is it important?

Purchase orders are important for businesses as it is instrumental in tracking expenditure, makes orders easier to track, helps avoid audit problems and provides contractual legal protection for the buyer and the supplier.

Risks

Alongside a purchase order system, it is vital that a company has strong credit management practices to safeguard cash flow from bad debts and late payment.A strong debt collections process is vital to ensure payment is made when the goods or services have been delivered.

Invoice promptly and accurately and chase up with reminders. If a customer will not pay or ignores payment requests take action – Appoint a debt collection agency, take debt recovery action through the courts or pass the debt to a solicitor.

Pure Business Law has experienced debt collection lawyers who can assist you with debt recovery.

Letter ending a contract

What is it? A letter terminating a contract also known as a Notice of Contract Termination, Notice of Cancellation of Contract or a Contract Termination Letter is a formal declaration indicating your intention to terminate a contract with the other party to the contract. When writing a letter terminating a contract ensure that you have the legal right to terminate the contract in the particular circumstances and keep your tone formal,straightforward, courteous and professional. Risks You should also ensure that :

• The letter contains a clear description of the reasons for the termination of the contract.
• The date of termination is mentioned.
• The letter thanks the other party for their services.

Our contract solicitors can provide you with a bespoke letter for a reasonable fixed fee that you can use to cancel a contract or agreement.

Letter assigning a contract

What is it?

Transferring a contract from one party to another is known as ‘assigning’ a contract or ‘an assignment’ of the contract. An assignment ends one party’s involvement in the contract and transfers their contractual rights, benefits and interests to a new party.

Risks

Some contracts may contain a clause prohibiting assignment; other contracts may require the other party to consent to the assignment. Unless assignment is prohibited in a contract, a party may assign their rights to third party without the consent of the other party to the agreement. A letter of assignment is used to effect the assignment and will be signed by the outgoing party and the incoming party.

Health and safety policy

What is it? A health and safety policy states the employer’s commitment to protect employees’ health and safety and to cooperate with other parties such as employees, supervisors, the health and safety representative to ensure a safe work environment.If you have five or more employees, you are legally required to have a written health and safety policy. Why is it important? If you do not have a written policy the Health and Safety Executive (HSE) can take action against you and prosecute you. Even if you do not have five employees it is best practice to have a written health and safety policy to make your health and safety arrangements clear. Consideration of the health, safety and welfare of staff is an integral part of the management process. The purpose of a Health and Safety policy is to establish general standards for health and safety at work and to distribute responsibility for their achievement to all managers, supervisors and other employees through the normal line management processes. Risks Managers must approach health and safety in a systematic way, by identifying hazards and problems, planning improvements, taking executive action and monitoring results. There should be an annual audit and regular risk assessments.

Health and safety policy

What is it? A health and safety policy states the employer’s commitment to protect employees’ health and safety and to cooperate with other parties such as employees, supervisors, the health and safety representative to ensure a safe work environment.If you have five or more employees, you are legally required to have a written health and safety policy. Why is it important? If you do not have a written policy the Health and Safety Executive (HSE) can take action against you and prosecute you. Even if you do not have five employees it is best practice to have a written health and safety policy to make your health and safety arrangements clear. Consideration of the health, safety and welfare of staff is an integral part of the management process. The purpose of a Health and Safety policy is to establish general standards for health and safety at work and to distribute responsibility for their achievement to all managers, supervisors and other employees through the normal line management processes. Risks Managers must approach health and safety in a systematic way, by identifying hazards and problems, planning improvements, taking executive action and monitoring results. There should be an annual audit and regular risk assessments.

Health and safety policy

What is it? A health and safety policy states the employer’s commitment to protect employees’ health and safety and to cooperate with other parties such as employees, supervisors, the health and safety representative to ensure a safe work environment.If you have five or more employees, you are legally required to have a written health and safety policy. Why is it important? If you do not have a written policy the Health and Safety Executive (HSE) can take action against you and prosecute you. Even if you do not have five employees it is best practice to have a written health and safety policy to make your health and safety arrangements clear. Consideration of the health, safety and welfare of staff is an integral part of the management process. The purpose of a Health and Safety policy is to establish general standards for health and safety at work and to distribute responsibility for their achievement to all managers, supervisors and other employees through the normal line management processes. Risks Managers must approach health and safety in a systematic way, by identifying hazards and problems, planning improvements, taking executive action and monitoring results. There should be an annual audit and regular risk assessments.

Consultancy agreement

What is it?

A consultancy agreement is a contract between a self-employed person (Consultant) and a customer requiring the consultant’s services.

It is similar to the standard contract used to hire a freelancer. This agreement clarifies the basic terms of your relationship with the freelancer eg the work to be done, fees payable and other terms of the agreement eg a non-solicitation clause, confidentiality clause, data protection, ownership of any intellectual property created by the freelancer, indemnification clause for any losses you incur due to the freelancer’s breaches of third party intellectual property. Etc.

Why is it important?

More specialist freelancers may want you to sign up to their own bespoke terms and conditions when you instruct them. If that is the case you must ensure that you check all the clauses carefully to ensure that they do not conflict with your requirements and that you are happy with the terms eg consultant to be liable for breaches of your Intellectual property and third party intellectual property, confidentiality, fee payable, data protection, indemnification clause etc.

Risks

You should also ensure that you are aware of the IR35 tax rules. If a freelancer is providing services to you through a company your arrangement may be subject to the IR35 tax rules. This means that the freelancer may have to pay tax and national insurance as if they were employed by you. HMRC has a useful tool at www.gov.uk to enable businesses check employment status for tax purposes.

From April 2020 if you are a medium or large business the responsibility for determining whether the IR35 tax rules applies to the consultancy and for payment of the income tax and national insurance on behalf of the freelancer lies with the company to whom the freelancer provides the services. If you are a “small business” (i.e. a business which satisfies two or more of the following requirements – i) a turnover of £10.2 million or less, ii) no more than 50 staff and iii) a balance sheet f no more than £5.1million the responsibility for determining whether the IR35 tax rules apply and for payment of the tax and national insurance lies with the freelancer.

Home/Office rental agreement

What is it?

A home office rental agreement is an agreement between an owner or lessee of property to share their home office space with another person. These agreements are usually used by start-ups and home-based businesses and will be in the form of a licence agreement. The licensor will be the owner or tenant of the property and the licensee will be the sharer who may be an individual or a company. If more than one individual sharer it is essential that they be all named on the agreement so that they remain jointly and severally liable under the rental agreement. The licence fee should be inclusive of the service costs eg internet, utilities, etc.

Risks

If your business is a lessee, you must check your lease and check with your landlord to ensure that the grant of a licence to the sharers will not be a breach of your obligations as a tenant.

Purchase order

What is it?

A purchase order is prepared by a buyer when the buyer orders goods or A purchase order is prepared by a buyer when the buyer orders goods or services from a seller. The purchase order will indicate the type of goods, quantity of goods and the price the buyer is willing to pay for the products and or services.

Once the seller accepts the purchase order it becomes a legally binding contract as the seller has agreed to sell the goods and or services at the prices put forward by the buyer. The seller will then issue an invoice to the buyer based on the purchase order.

Why is it important?

Purchase orders are important for businesses as it is instrumental in tracking expenditure, makes orders easier to track, helps avoid audit problems and provides contractual legal protection for the buyer and the supplier.

Risks

Alongside a purchase order system, it is vital that a company has strong credit management practices to safeguard cash flow from bad debts and late payment.A strong debt collections process is vital to ensure payment is made when the goods or services have been delivered.

Invoice promptly and accurately and chase up with reminders. If a customer will not pay or ignores payment requests take action – Appoint a debt collection agency, take debt recovery action through the courts or pass the debt to a solicitor.

Pure Business Law has experienced debt collection lawyers who can assist you with debt recovery.

Letter ending a contract

What is it? A letter terminating a contract also known as a Notice of Contract Termination, Notice of Cancellation of Contract or a Contract Termination Letter is a formal declaration indicating your intention to terminate a contract with the other party to the contract. When writing a letter terminating a contract ensure that you have the legal right to terminate the contract in the particular circumstances and keep your tone formal,straightforward, courteous and professional. Risks You should also ensure that :

• The letter contains a clear description of the reasons for the termination of the contract.
• The date of termination is mentioned.
• The letter thanks the other party for their services.

Our contract solicitors can provide you with a bespoke letter for a reasonable fixed fee that you can use to cancel a contract or agreement.

Letter assigning a contract

What is it?

Transferring a contract from one party to another is known as ‘assigning’ a contract or ‘an assignment’ of the contract. An assignment ends one party’s involvement in the contract and transfers their contractual rights, benefits and interests to a new party.

Risks

Some contracts may contain a clause prohibiting assignment; other contracts may require the other party to consent to the assignment. Unless assignment is prohibited in a contract, a party may assign their rights to third party without the consent of the other party to the agreement. A letter of assignment is used to effect the assignment and will be signed by the outgoing party and the incoming party.

Health and safety policy

What is it? A health and safety policy states the employer’s commitment to protect employees’ health and safety and to cooperate with other parties such as employees, supervisors, the health and safety representative to ensure a safe work environment.If you have five or more employees, you are legally required to have a written health and safety policy. Why is it important? If you do not have a written policy the Health and Safety Executive (HSE) can take action against you and prosecute you. Even if you do not have five employees it is best practice to have a written health and safety policy to make your health and safety arrangements clear. Consideration of the health, safety and welfare of staff is an integral part of the management process. The purpose of a Health and Safety policy is to establish general standards for health and safety at work and to distribute responsibility for their achievement to all managers, supervisors and other employees through the normal line management processes. Risks Managers must approach health and safety in a systematic way, by identifying hazards and problems, planning improvements, taking executive action and monitoring results. There should be an annual audit and regular risk assessments.