Employment Contracts: Legal tips for employers

Employment Contracts: Legal tips for employers

Introduction

Employment contracts are a fundamental part of any business, providing legal clarity on the rights and responsibilities of both employers and employees. A well-drafted employment contract helps prevent disputes, ensures compliance with UK employment law, and protects business interests.

Employers must ensure their contracts meet legal requirements, covering essential terms such as salary, working hours, notice periods, and details of any paid leave. In this guide, we outline the key elements of employment contracts, legal obligations for employers, and best practices for drafting agreements that benefit both parties.

What is an Employment Contract?

An employment contract is a legally binding agreement between an employer and an employee that outlines the terms of employment. This contract sets expectations, defines the working relationship, and ensures compliance with UK employment law.

In the UK, under the Employment Rights Act 1996, all employees must receive a written statement of their key terms and conditions on or before their first day of employment. This is commonly referred to as a written statement of employment particulars. A written statement of particulars is not a contract of employment, but is the bare minimum of information that must be provided to employees/workers. A contract of employment will contain the same information as a written statement of particulars as well as additional clauses defining further obligations.

Types of employment contracts

1. Permanent contracts

• The most common type of employment contract.
• Provides continuous employment until terminated by either party.
• Employees receive statutory rights such as sick pay, holiday entitlement, and redundancy pay.

2. Fixed-term contracts

• Used for temporary employment, such as covering maternity leave or project-based work.
• Ends on a specific date or after a certain task is completed.
• Employees on fixed-term contracts have similar rights as permanent employees, including unfair dismissal protection after two years.

3. Zero-hours contracts

• Employees work only when required, with no guaranteed hours.
• Common in hospitality, retail, and gig economy roles.
• Workers must receive at least National Minimum Wage and holiday pay.

4. Part-time contracts

• Employees work fewer hours than a full-time employee.
• Part-time workers have access to the same benefits as full-time employees and should not be treated less favourably in comparison.

5. Casual or freelance contracts

• Used for self-employed individuals or contractors.
• Freelancers do not have the same employment rights as employees, such as redundancy pay or sick leave.

Key elements of an employment contract

1. Job title and description

• Clearly define the role and responsibilities.
• Helps set performance expectations and prevents disputes.

2. Salary and benefits

• Outline the employee’s gross salary, payment frequency, and discretionary bonus structures.
• Specify benefits such as pensions, health insurance, and life assurance.

3. Working hours and overtime

• Define standard working hours and overtime rates.
• Include flexible or remote working arrangements if applicable.

4. Notice periods and termination

• Specify the required notice period for both employer and employee.
• Ensure compliance with statutory notice periods based on the employee’s length of service.

5. Holiday entitlement and sick pay

• Employees must receive at least 5.6 weeks of paid holiday per year.
• Clarify sick pay policies, whether statutory or enhanced.

6. Confidentiality and restrictive covenants

• Prevent employees from disclosing sensitive company information.
• Non-compete clauses can restrict employees from working with competitors after leaving.

7. Disciplinary and grievance procedures

• Outline how workplace disputes and complaints will be handled.
• Ensure compliance with ACAS Code of Practice on disciplinary and grievance procedures.

Legal obligations for employers

1. Providing a Written Statement of Particulars on day one

Since April 2020, employers must provide a written statement of employment particulars on or before the first day of work.

2. Compliance with National Minimum Wage

Ensure employees are paid at least the National Minimum Wage or National Living Wage, depending on their age and employment status.

3. Protecting against discrimination

Contracts must comply with the Equality Act 2010, ensuring no discrimination based on age, gender, race, disability, or other protected characteristics.

4. Ensuring fair dismissal processes

Employees with over two years of service have protection against unfair dismissal. Employers must follow a fair process before terminating employment, including warnings and proper notice.

Expert Insights: The importance of a well-drafted contract

“Many employers overlook contract details until a dispute arises. Providing a  well-drafted employment contract at the beginning of the employment relationship allows each party to understand their obligations going forward and instructs them as to how they should conduct themselves in typical employment situations. A well-drafted contract not only protects the business but also ensures a fair and transparent working relationship.” Amber Tansley, Employment specialist, Fosters Solicitors

Best practices for drafting employment contracts

• Seek legal advice: A lawyer can help draft contracts tailored to your business needs.
• Ensure clarity: Avoid ambiguous terms that could lead to misinterpretation.
• Review regularly: Employment laws evolve, so update contracts as needed.
• Get employee sign-off: Always have employees review and sign their contract before starting work.

Further resources

• Business Solicitors
• ACAS Employment Law Guide

Legal Support

Our Business & Commercial team can help you and your organisation manage your legal obligations as an employer with expert advice and representation when you need it.

Our Employment Law specialists are available to support you and your business through a range of employment matters, relating to the hire and performance of your employees, as well as grievance management. We can help you develop employee policies, handbooks, and documentation that can help ensure that you comply with accepted codes of practice and are protected from potential liability. In the event of any disciplinary and grievance procedures, or litigation, we can provide high quality legal advice and representation. Contact us for more information.

This article was produced on the 16th June 2025 for information purposes only and should not be construed or relied upon as specific legal advice.