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Thanks for the reply.
If I define 'we' as 'Myself or my-company or the company I am contracted to then...
1/ It looks like we're OK to setup the webcam to collect direct evidence should it be needed later.
2/ We are not committing a criminal offense in monitoring this employees activities (His Computer screen) using a webcam.
3/ We are not infringing his human rights (A wide area I know) by not telling him at this time he is being monitored.
4/ I am not sure there is an "IT policy" but I am told 'misuse of this type' is part of his employment contract - So same thing in effect.
Once again thanks for the advice.