Employment Contracts and Company Registration
If you have registered your company after being a sole trader, then you also need to reissue employment contracts as well.
Registering a company is an exciting decision for any business. Now that you have successfully registered as a company it’s important to confirm that all the associated legal requirements have been satisfied.
One of these legal requirements are the reissuing of employment contracts.
An employment contract is entered into when an employer offers propsecitve employees a job. This is the case regardless of whether the employer is a sole trader or a company. Consequently a legal relationship is created where rights and obligations exist between the employer and employee.
The reason why the law demands employment contracts to be changed is because the legal relationship is transformed as a result of the incorporation of the entity.
As a business owner, you need to be across all these changes to safeguard your employees and your business. This may seem like dauntingly attentive task, however LawPath’s quick quotes service allows you to engage with an experienced employment lawyer to speed up the process and confirm nothing has been missed.
Employees under a sole trader
Sole traders have the benefit of full control over their business and can therefore employ people to assist with their day-to-day operations. Employees working under this business structure are only accountable to the sole trader.
This is a consequence of a sole trader being legally responsible for all aspects of their business. The responsibility of managing employees rests exclusively on sole traders, and cannot be shared with others. For more insight, read our sole trader legal guide.
Employees under a registered company
A company is a separate legal entity and has the legal capacity and power of an individual. Consequently companies can enter into contracts just like a sole trader. It is important to remember that even though they can both enter into contracts, under law, a company and a sole trader are two separate and distinct individuals.
In essence, this means that it wasn’t your boss or manager that you entered into an employment contract with – it was actually the company itself. That is, the company is the employer.
Why do you need to make the switch?
Even if the same person remains in charge following incorporation of their business, employees must be reissued an employment contract.
This is essentially down to the fact that employees of sole traders are accountable to only that person. Employees under a registered company are accountable to the company and not the person in charge. Therefore the employment contract is entirely changed under the law.
Following company registration you might find that your business operations may largely be the same as they were before. Job descriptions, remuneration, leave and other important terms in employment contracts may also remain identical. However this doesn’t discount the requirement of needing to reissue these contracts. Regardless of how purposeless you may feel reissuing may be, under law it’s a big deal.
Make sure your employees and your business are safeguarded. LawPath’s employment lawyers can ensure your business is protected and legally compliant by reviewing contracts and providing expert advice.
LawPath has access to experienced employment lawyers that can assist you with reissuing employment contracts. Contact a LawPath consultant on 1800LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from our network of 600+ expert lawyers or to get answers to your legal questions.
Tiana is a Paralegal, working in our content team, which aims to provide free legal guides to facilitate public access to legal resources. With a strong interest in commercial law, her research focuses on the revolutionising legal sphere and the implications for all involved.