Directors’ Service Agreements
If you require assistance with creating a Directors’ Service Agreement, or are having issues in relation to an existing Agreement, Blacks Solicitors’ expert Employment Law team can help.
Senior managers and executive directors (but generally not non-executive directors) are employees of the companies for which they work. As such, they are entitled by law to be provided with a statement of the main terms of their employment, in the same way as any other employee.
However, when it comes to senior staff, the statutory rules are by no means the most compelling reason for you to have detailed Service Agreements in place defining your working relationship.
Why you should have a Service Agreement in place for directors and senior managers
Generally, senior managers and directors will be very well-remunerated relative to more junior members of staff. Having a detailed explanation of the duties of the executive is very prudent.
It is also usual for executives to receive a fixed salary – notwithstanding the number of hours that they work. Salary is often supplemented by bonuses, commission and long-term incentives.
If executives are to be provided with other contractual benefits (for example, private healthcare insurance, a company car or car allowance, and death in service insurance) it is important that the terms under which these benefits are offered are clearly described in order to avoid any confusion or disputes.
In the case of company cars, laptops, phones, iPads or other property that you are providing to executives during their employment, you should clearly state the terms on which they are being provided. For example, are these items for business use only?
Executives also tend to have greater access to confidential information and closer contact with key clients. For this reason, it is all the more important that their Service Agreements provide you with protection from the misuse of those contacts and confidential information. This protection may take the form of:
- Clauses prohibiting the executive from disclosing confidential information outside the business
- Clauses providing for long notice periods and entitling the employer to place the executive on “garden leave” during such notice in order to reduce the executive’s ability to give any of the employer’s competitors an unfair competitive advantage after the termination of employment
- Covenants restricting the executive from, for example, competing with you and/or soliciting your customers and/or poaching your staff.
In addition, executives are often offered full pay during periods of sickness absence. In the absence of a provision in the Service Agreement setting out the extent of any entitlement to full sick pay, the executive may become entitled to full sick pay for an indefinite period.
Finally, if the employer wants the executive to provide his or her services exclusively to the employer (as most do) then this needs to be clearly stated.
If you would like assistance with creating a Service Agreement for a director or senior manager, or are having issues in relation to an existing Agreement, please email or call our Employment Law team today on 0113 207 0000 for a free no obligation discussion.