Directors service agreement (employment contract)

About this directors service agreement

Today a company is under a statutory obligation to provide written terms of employment to a director, as to any other employee. It is advantageous to both sides to set down the package in an employment contract (for directors, also known as a directors service agreement), rather than in just a few words from the company.

This directors service agreement provides a complete legal and practical framework for any executive director. It covers all the requirements for an employment contract of a board member as well as clarifying the relationship between the company and the director so as to prevent conflicts of interest. The service contract is particularly strong on the protection of confidentiality and company secrets.

The service agreement is flexible and can be used whether:

• the term of employment is fixed or running;
• the organisation is a company, charity or NGO (in the case of the latter two, the employee will be director level equivalent).

All common perquisites such as salary and benefits are also covered. Use of plain English makes editing easy and allows it to be understood by all parties.

This document provides a balance between protection for the director and for the company. If there is a difference in interests, we have favoured the company. Some of these provisions are required to comply with the law. The explanatory notes, which come with these documents, will guide you as to the importance of specific issues.

Account has been taken in this contract of:

• the employment rights of executive directors are the same as other employees, but there is an additional need to regulate the relationship between the director and the organisation;
• The Basic Conditions of Employment Act

When to use this directors service agreement

• Appropriate for any director (including a Managing Director, CEO or Chairman) of any company;
• Can also be used for charities and NGOs where the level of senior management is equivalent to the directors of a company;
• Can be used for an employed part-time director.

Employment contract features and contents

• Protects the board from criticism;
• Protects the company from claims both before an Industrial Tribunal and in court;
• Protects the director from unreasonable demands;
• Up to date with the latest changes in company law;
• Provides a "shopping list" of possible director perquisites;
• Helps the company to comply with employment regulations;
• Inculdes the Basic Conditions of Emplyment Act;
• Follows current best practice recommendations by Department of Labour;
• Strong on protection of employer's confidential information;
• Structured so as to minimise the administrative burden of legal compliance.

The directors service agreement comprises 30 paragraphs and a schedule:

• Start and continuity;
• Job title and description;
• Place and hours of work;
• Salary;
• Expenses;
• Leave for holidays and other reasons;
• Sickness or other absence;
• Pension;
• Health insurance;
• Liability insurance;
• Company car;
• Director's responsibilities;
• Other business and employment;
• No competition;
• Confidentiality;
• Intellectual property;
• Staff handbook and company policies;
• Disciplinary and grievance procedures;
• Termination (of employment or fixed term);
• Arrangements during notice period;
• Procedure after termination;
• Summary termination;
• Reconstruction or amalgamation;
• Data protection;
• Severance and invalidity;
• Schedule: Bonus system.