Creating a proper written employment contract is important for any business. Whether you’re hiring your first new employee or your fiftieth, the employment contract lays out the terms of employment and is a tool to protect both the employer and employee, ensuring expectations are clear and legal obligations are met.
If you’re a small business owner, legal compliance officer, or HR professional, this guide will explain how to write an employment contract, covering the essential components, legal requirements in the UK, and where to find professional advice.
Why is an Employment Contract Important?
A written contract of employment sets out the employment terms for the employer and employee relationship. It’s a legal requirement in the UK for employees and workers to get a written statement of terms from their employer, and it helps prevent disputes further down the line. A well-written contract removes ambiguity and clarifies job roles, salary, annual leave, sick leave, and other paid leave, benefits and responsibilities.
Since 6 April 2020 UK law requires employers to give employees a written statement (usually a contract) on or before their first day of work. The type of contract depends on the expected length of the employee’s tenure at the company.
Fixed Term Contract
A fixed-term contract of employment is for workers hired on a more casual basis and ends once a project or task is complete or on a specific end date. It may be renewed based on the needs of the company and if the employee agrees.
Permanent Contract
A permanent contract of employment is a written document that both the employer and employee are legally bound to. This type of contract of employment is for long-term employees and has no specific duration, creating more job security for the employee.
What should an Employment Contract Contain?
A clear structure and compliance with UK law is key when writing an employment contract. Below are the key details every employment contract should have, plus some extra bits you might want to include.
The Principal Statement
The principal statement is required by UK employment law, forms the core of the employment contract, and must be provided to employees on their first day. It includes:
- Employer’s details: Provide information like the employer’s address, name, and other relevant details.
- Employee: The employee’s name, job title, responsibilities, and job description.
- Start date: Date of employment and, if applicable, continuous employment information.
- Working hours: Specify normal working days, hours, and whether flexibility, overtime, or Sunday work is required.
- Place of work: Address of the workplace and whether the employee may need to relocate. Remote work information if applicable.
- Compensation details: How much the employee’s wages or salary will be before tax and national insurance, how often (e.g. monthly or weekly) and in what form. Entitlements to additional pay like commissions and benefits. National Minimum Wage compliance is required.
- Holidays: Annual leave entitlement, holiday pay information, and public holidays.
- Probationary period (if applicable): Length and conditions of probation period.
- Obligatory training (if applicable): Explain the training required and whether the employer pays for the training.
The Wider Written Statement
Beyond the principal statement, additional employment particulars should be included in the wider written statement. This must be provided within two months of starting employment. Key employment particulars include:
- Pensions: Employer’s pension schemes or contributions.
- Notice: Notice periods for either party to terminate employment.
- Sick pay and parental leave: Pay entitlements for illness, maternity leave and paternity leave.
- Disciplinary and grievance procedures: How disputes and grievances will be handled.
Extra Clauses to Protect Both Parties
While the above meets the legal requirements, you can include extra clauses to add clarity and protection, such as:
- Confidentiality: Employees must not disclose company confidential information during or after employment.
- Intellectual Property Rights: Determines who owns work created during employment.
- Post-termination restrictions: Prevent employees from joining competitors or poaching clients after leaving the business.
- Garden leave: Conditions for garden leave when employees are on notice and not working in the office.
- Pay in lieu of notice (PILON): Allow for early termination of employment while covering the notice period with pay.
- Sick pay policies: If employees are entitled to statutory or enhanced sick pay.
Including these clauses means your employment contract is not only compliant, but also specific to your business.
What if the Employer doesn’t provide a Contract?
Not providing a written employment contract can lead to legal consequences. Workers can bring a claim to an Employment Tribunal and get up to four weeks’ pay. Avoiding this scenario not only protects your business financially, but also shows you’re a fair and responsible employer.
Verbal agreements or unwritten terms can lead to disputes. For example, if an employee thinks they’re entitled to an annual bonus because of past practice, they can argue this under “custom and practice” even if it’s not written down. A contract avoids misunderstandings.
Where to Get Employment Advice
Writing an employment contract can be complex, and professional advice can be invaluable.
How Darwin Gray Can Assist
At Darwin Gray Solicitors, we help businesses like yours create robust employment contracts. We can:
- Ensure your contracts comply with UK law.
- Advise on specific clauses such as confidentiality and post-termination restrictions.
- Guide you on more complicated employment relationships, for example, fixed-term, zero-hour and freelance workers.
We also offer ongoing support for businesses to help you update contracts as employment law and your business changes. Whether you’re starting from scratch or reviewing existing contracts, we can ensure your documents are thorough, compliant and protective.
Protect Your Business, Empower Your Employees
Employment contracts are more than a legal formality; they’re a blueprint for healthy and transparent employment relationships. By having clear, detailed and compliant contracts, you protect both your business and your employees.
Feeling stuck on where to start or just want peace of mind your contracts are bulletproof? Contact Darwin Gray Solicitors today for employment advice and to schedule a consultation with one of our employment law solicitors.
