Consideration

Contracts are based on a principle of “exchange”. In other words, to have a binding contract, each party must offer something “in return for” something else. The legal word for this is “consideration”. In an employment context, this is also described as the work/wage bargain, or “mutuality of obligation” (see chapter 2).

Consideration is nearly always money, i.e. wages from the employer in exchange for work from the employee, but it does not always have to be. For example, in Dresdner Kleinwort Limited v Attrill [2013] EWCA Civ 394, a group of bankers were offered an improved bonus as an inducement not to quit their jobs and join competitors. The Court of Appeal said that the decision to stay with their employer was good consideration for the employer’s promise.

Lack of consideration explains why true volunteers have no employment contract. It does not matter what hours they work, how much control is exercised over them, how much expertise they have, or the extent to which their activities resemble paid work, or are performed alongside paid workers (X v Mid Sussex Citizens Advice Bureau [2012] UKSC 59). Without consideration, they cannot be employees.