How to Write an Employment Contract in the UK

What is an Employment Contract?

An employment contract is a legally binding agreement between an employer and employee that sets out the terms and conditions of employment. In the UK, every employee must receive a written statement of employment particulars on or before their first day of work - this is a legal requirement under the Employment Rights Act 1996, as amended by the Good Work Plan in 2020.

While the terms "employment contract" and "written statement of particulars" are often used interchangeably, there's a subtle legal distinction. An employment contract is the full agreement (which can include verbal and implied terms), while the written statement is the document that confirms the main terms. In practice, most UK employers provide a comprehensive written contract that serves both purposes.

The contract establishes the legal relationship between employer and employee, defining rights, responsibilities, and expectations on both sides. It provides legal protection for both parties and helps prevent disputes by clearly documenting what was agreed. A well-written contract is your first line of defense against employment tribunal claims and workplace disagreements.

Why Employment Contracts Matter

A robust employment contract protects your business in multiple ways. It clarifies expectations from day one, reducing the risk of misunderstandings about pay, hours, duties, or benefits. It provides legal evidence of the terms agreed if disputes arise later. It helps you enforce important protections like confidentiality, intellectual property ownership, and reasonable post-employment restrictions.

For employees, a clear contract provides security and transparency. They know exactly what they're entitled to, what's expected of them, and how issues will be handled. This clarity builds trust and engagement, leading to better employee retention and performance. Employment tribunals consistently emphasize the importance of clear, written contracts in maintaining healthy workplace relationships.

Essential Information Required by Law

Under UK law and ACAS guidelines, an employment contract must include the following information:

Understanding the 2020 Legal Changes

The Good Work Plan brought significant changes to UK employment law in April 2020, expanding workers' rights and tightening the requirements for written statements. Previously, employers had up to 2 months to provide written particulars and the rules only applied to employees (not all workers). Now, the statement must be provided on or before day one, and it must be given to all workers, including agency workers, casual workers, and those on zero-hours contracts.

The 2020 changes also expanded the list of mandatory information. Employers must now include details about benefits, training entitlement, probationary periods, and other paid leave beyond holiday entitlement. These reforms recognize the changing nature of work and ensure that all workers have clarity about their employment terms from the very start.

Step-by-Step Guide to Writing Your Contract

Step 1: Start with Basic Information

Begin with the formal contract header including the date, employer's full legal name and registered address, and employee's full name and address. Clearly state that this is an employment contract and the date it comes into effect. If your company trades under a different name, include both the legal entity name and the trading name to avoid confusion.

Include the employee's start date prominently. If the employee has previous continuous employment with your organization or a related company, note when continuous employment began, as this affects statutory rights like redundancy pay and notice periods. Be precise with dates to avoid future disputes about length of service.

Step 2: Define the Role Clearly

Clearly specify the job title and provide a comprehensive description of duties and responsibilities. Be specific enough to set clear expectations, but not so restrictive that you can't adapt as business needs change. Consider including a flexibility clause allowing reasonable changes to duties, particularly for small businesses where roles often evolve.

Include reporting structure and any supervisory responsibilities. If the role involves managing budgets, handling confidential information, or representing the company publicly, make this explicit. For senior roles, consider specifying key performance indicators or objectives. Remember that job descriptions can form part of the contract, so ensure they're realistic and achievable.

Step 3: Specify Employment Terms and Type

State clearly whether this is permanent, fixed-term, or casual employment. For permanent contracts, confirm there's no fixed end date. For fixed-term contracts, include the end date or the event/circumstances that will trigger termination (e.g., "until the completion of Project X" or "to cover maternity leave until 30 June 2025").

If there's a probationary period, clearly define its length (typically 3-6 months) and the terms that apply during probation. Explain what happens at the end of probation - will there be a formal review? What are the success criteria? What notice period applies during probation? Be aware that probationary periods don't change statutory employment rights, but they can affect contractual benefits and notice periods if properly drafted.

Step 4: Detail Pay and Benefits Comprehensively

Specify the exact salary or hourly rate, payment frequency (weekly, monthly, four-weekly), and payment method (typically bank transfer). State when payment is made - for example, "on or around the last working day of each month" or "weekly on Fridays." If salary is reviewed annually, mention this without creating a contractual obligation to increase it.

Include comprehensive details of all benefits: bonuses (specifying whether discretionary or contractual), commission structures with calculation methods, pension scheme details including contribution rates, company car or car allowance, health insurance, life assurance, and any other perks. For discretionary bonuses, make it crystal clear that the company reserves absolute discretion - use phrases like "wholly discretionary" to avoid creating contractual obligations.

Don't forget to mention deductions. Explain that tax and National Insurance will be deducted under PAYE, pension contributions will be deducted if the employee doesn't opt out, and any other authorized deductions (student loans, court orders, overpayment recovery). This transparency prevents confusion when the employee receives their first payslip.

Step 5: Set Working Hours and Patterns

Clearly state normal working hours per week, working days, core hours, and shift patterns if applicable. For example: "37.5 hours per week, Monday to Friday, 9:00am to 5:30pm with a 1-hour unpaid lunch break." For part-time roles, be specific about which days and which hours on those days. Ambiguity here causes more disputes than almost any other contract term.

Include provisions for overtime - is it permitted? Is it paid or unpaid? At what rate? Is it voluntary or mandatory? For roles exempt from the Working Time Regulations (directors, senior managers), state this clearly. Include details about rest breaks (workers are entitled to a 20-minute break if working more than 6 hours) and weekly rest periods.

If you offer flexible working, hybrid working, or remote working options, document the terms carefully. Specify how many days can be worked from home, whether office attendance is required on certain days, expectations for availability during core hours, and arrangements for home working equipment and expenses. The rise of remote working since 2020 has made these clauses increasingly important.

Step 6: Outline Holiday and Leave Entitlements

Specify annual holiday entitlement clearly. The statutory minimum is 5.6 weeks (28 days for someone working 5 days per week), which includes bank holidays unless you state otherwise. Many employers offer more than the statutory minimum - if so, specify the total entitlement and whether bank holidays are included or additional.

For part-time workers, explain how pro-rata calculation works. For example: "Holiday entitlement is calculated pro-rata based on your working days. As you work 3 days per week, your annual entitlement is 16.8 days (28 days × 3/5)." This prevents confusion and complaints about "unfair" treatment of part-timers.

Explain how holidays are requested and approved - how much notice is required? Who approves requests? What happens if multiple people want the same period? Can the employer require holidays to be taken at certain times (shutdown periods)? How is unused holiday treated if someone leaves? These procedural details prevent many common holiday disputes.

Consider including details about carrying over unused holiday (the statutory minimum cannot normally be carried over, but additional days can be), what happens to holiday accrued during long-term sickness, and how holiday pay is calculated for those with variable pay (including overtime, commission, etc.).

Step 7: Include Comprehensive Sickness and Absence Policies

Detail the procedure for reporting sickness or absence. Typically: "You must notify your line manager by telephone before 9:30am on the first day of absence, and provide regular updates as required. For absences of more than 7 days, you must provide a fit note from your GP." Being specific about notification requirements helps manage absence effectively and fairly.

Explain entitlements to sick pay comprehensively. All eligible employees are entitled to Statutory Sick Pay (SSP) from the 4th day of sickness, currently £116.75 per week (2025 rate). If you offer company sick pay (occupational sick pay), specify the scheme clearly: how much is paid, for how long, whether it includes or is in addition to SSP, and whether it's subject to conditions like length of service or completion of probation.

Include return-to-work procedures - will there be a meeting with the manager? What support is available for phased returns? What happens if the employee cannot return to their original role due to health reasons? These provisions demonstrate good practice and help you manage long-term absence sensitively and legally.

Step 8: Define Notice Periods for Both Parties

Specify how much notice both parties must give to terminate employment. For employees, one week is the statutory minimum after one month's service, but many contracts require longer - one or three months is common for professional roles. For senior positions, notice periods of 6 months or more are not unusual.

For employers, statutory notice increases with length of service: one week for employees with 1 month to 2 years' service, then one additional week for each complete year of service up to 12 weeks. You can offer more than this but never less. State clearly whether notice must be in writing, to whom it should be given, and when it takes effect.

Consider including provisions about pay in lieu of notice (PILON) if you want the flexibility to end employment immediately while paying notice period. Also address garden leave - the ability to require an employee to stay away from work during their notice period while receiving full pay. These clauses are particularly important for roles with access to sensitive commercial information or customer relationships.

Step 9: Add Important Protective Clauses

Confidentiality clauses protect your business information. Be specific about what information is confidential (trade secrets, customer data, financial information, business strategies) and how long the obligation lasts (usually indefinitely for true trade secrets, during and after employment for other confidential information).

Intellectual property provisions ensure that anything the employee creates in the course of their employment belongs to your company. This is particularly important for roles involving product development, software creation, marketing content, or research. The contract should state that the employee assigns all IP rights to the employer and will assist with obtaining patents or registrations if required.

Post-termination restrictions (restrictive covenants) can protect your business after employment ends, but must be carefully drafted to be enforceable. Non-compete clauses must be no wider than necessary to protect legitimate business interests - typically 3-6 months for junior roles, possibly longer for senior positions with extensive customer contact or confidential knowledge. Courts will strike down restrictions that are too broad in scope, duration, or geographic area.

Also consider including: data protection provisions confirming compliance with UK GDPR, right to search policies if relevant to your business, rules about accepting gifts or hospitality, obligations regarding professional registrations or licenses, and requirements to disclose outside interests or other employment.

Step 10: Complete with Proper Formalities

End with clear signature blocks for both employer and employee, with space for printed names, positions, dates, and signatures. Both parties should sign two copies, with each retaining an original signed version. This proves agreement to the terms and makes enforcement much easier if disputes arise.

Consider having contracts witnessed, particularly for senior appointments or where restrictive covenants are included. A witness signature adds formality and can provide evidence that the employee signed voluntarily with full knowledge of the terms. The witness should be independent (not another employee if possible) and should add their name, address, and occupation.

Before finalizing, include an entire agreement clause confirming that the written contract supersedes all previous discussions, agreements, or representations. This prevents employees from later claiming that verbal promises were made that contradict the written terms. Also confirm that the contract can only be changed by written agreement signed by both parties.

Common Drafting Mistakes That Void Clauses

Many contracts contain clauses that are unenforceable due to poor drafting. Unreasonable restrictive covenants top the list - courts will not enforce blanket bans on working for competitors if they go beyond what's necessary to protect your business. A 2-year worldwide non-compete for a junior sales role would almost certainly be struck down.

Penalty clauses disguised as liquidated damages are also problematic. You cannot charge an employee £10,000 for giving short notice if the actual loss to your business would be much less. The clause must represent a genuine pre-estimate of loss, not a punishment. Similarly, clauses requiring repayment of training costs must be proportionate and reasonable.

Ambiguous language causes enforceability problems too. If a term can be interpreted in multiple ways, courts interpret it against the party who wrote it (contra proferentem rule). Use plain English and be specific. Instead of "salary may be reviewed," state "the Company will review your salary annually but is under no obligation to increase it."

Keeping Contracts Current

Employment law changes frequently, and contracts must keep pace. The 2020 changes to day-one rights, for example, meant thousands of contracts needed updating. Set a reminder to review your standard contract template annually, checking for legal changes and ensuring it still reflects your current business practices.

When you need to change existing employee contracts, remember that you generally need employee agreement unless the contract includes a flexibility clause allowing certain changes. Unilateral changes to terms can constitute breach of contract or constructive dismissal. If you need to make changes, consult with affected employees, explain the business reasons, and consider whether you can offer something in return for their agreement.

ACAS Guidelines for Employment Contracts

ACAS (Advisory, Conciliation and Arbitration Service) provides official guidance on employment contracts. Key ACAS principles include:

• Contracts should be clear, fair, and compliant with employment law
• Both parties should understand their rights and obligations
• Contracts should be reviewed regularly to ensure they remain current
• Any changes to contracts require employee consent or proper consultation
• Contracts should treat employees fairly and equally

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