Policy does not form part of the employment contract and therefore does not have any contractual or binding effect. But if they are expressly incorporated into the employment contract, they do form part of the contract and are binding. For this reason, organisations must be very careful not to incorporate policy into their employment contract.
All policy must be separate from your employment contract and the precise wording of how you refer to policies in your employment contract becomes very important. We can draft an employment contract template for you or review yours to make sure you get it right.
A personnel handbook
For this reason, we also advise that organisations have the contract and policies in separate documents. Many organisation put all policy in a handbook, which is simply a quick reference collection of all policies. We also advise that you put all generic binding terms in the handbook. The handbook should contain all the generic things that apply to all employees. The binding terms that apply to just one employee should be included in a letter of appointment.
A handbook should be split into two parts. Part 1 contains the binding terms and part 2 the non-binding rules. This is to ensure it is very clear what forms part of the employment contract and what doesn’t. You can read more about the structure we recommend for employment contracts and get an employment contract template.
Why does it matter?
If policy does, it assumes a contractual effect, which means that if an employer fails to follow its policy, it will be in breach of contract. The employee would then be entitled to the normal contractual remedies for breach of contract. In Denel (Pty) Ltd v Vorster (13/2003) [2004] ZASCA 4 (5 March 2004) a disciplinary code was expressly incorporated in the terms and conditions of employment of each employee. Nugent JA in the SCA held that the terms of the code then assumed binding contractual effect. So that judgment suggests that unless policies are expressly incorporated in the employment contract, they do not have any contractual or binding legal effect.
The governing body of an employer can change policy and this is not regarded as changing the terms and conditions of employment. The employer does not need to get the consent of the employees to change policy.
If changing a policy means that the contract changes, this can have several severe consequences, like being an unfair labour practice, breach of contract, or could breach a collective agreement.
What is part of the employment contract?
There has been debate and judgments about whether the contract includes both terms and conditions (and what these terms mean). The short answer is yes. We prefer referring to just terms – we believe this incorporates conditions and it is not necessary to say “terms and conditions”.
The important thing is that everything that forms part of the employment contract is binding.
What is a policy?
In this article, we’ve only mentioned policies but the same goes for procedures, standards (including rules or codes) or guidelines.
