An employment contract is a legally binding agreement between an employer and an employee that sets out the terms and conditions of the employment relationship. In the UK, every employee has a contract from the moment they accept a job offer, whether or not anything is written down.
Written Statement of Particulars
Since 6 April 2020, employers must provide a written statement of employment particulars to every employee and worker on or before their first day of work. This is not the full contract but contains the key terms required by section 1 of the Employment Rights Act 1996.
Principal Statement (Day One)
The following must be provided on the first day:
| Term | Detail |
|---|---|
| Employer’s name | Legal name of the employing entity |
| Employee’s name | Full name |
| Job title or description | Role and main duties |
| Start date | When employment begins |
| Continuous employment date | If different from start date (e.g. if previous service counts) |
| Pay | Rate, frequency and method of payment |
| Working hours | Normal hours and days of the week |
| Holiday entitlement | Including public holidays — see holiday entitlement |
| Place of work | Address or indication of multiple/variable locations |
| Probationary period | Duration and conditions |
| Benefits | Any non-pay benefits provided |
| Training requirements | Mandatory training and whether employer-funded |
Wider Written Statement (Within 2 Months)
The following can be provided within the first 2 months:
| Term | Detail |
|---|---|
| Pension | Auto-enrolment pension details |
| Sick pay | Statutory Sick Pay and any company sick pay scheme |
| Notice periods | How much notice each party must give |
| Collective agreements | Any terms affected by collective bargaining |
| Disciplinary and grievance | Procedures and who to contact |
Types of Employment Contract
| Contract Type | Key Feature |
|---|---|
| Permanent | No fixed end date; continues until terminated by either party |
| Fixed-term | Ends on a specified date or completion of a task |
| Zero-hours | No guaranteed minimum hours; worker can refuse work |
| Casual / ad hoc | Work offered and accepted on an irregular basis |
| Part-time | Fewer hours than a comparable full-time worker |
| Agency | Worker supplied by an employment agency |
Zero-Hours Contracts
Under a zero-hours contract, the employer is not obliged to offer work and the worker is not obliged to accept it. Key rules:
- Workers on zero-hours contracts have the same rights to holiday pay, national minimum wage and rest breaks
- Exclusivity clauses are banned — the employer cannot prevent the worker from working for others
- Holiday entitlement accrues based on hours worked
Key Contractual Terms
Remuneration
The contract should specify:
- Basic salary or hourly rate (which must meet the national minimum wage or National Living Wage)
- Overtime rates and conditions
- Bonus structure and eligibility
- Commission arrangements
- Pay review dates
All pay is processed through PAYE payroll with deductions for income tax, National Insurance and pension contributions.
Restrictive Covenants
Employment contracts often include clauses that restrict the employee after they leave:
- Non-compete — preventing the employee from working for a competitor for a specified period
- Non-solicitation — preventing the employee from approaching clients or customers
- Non-dealing — preventing the employee from doing business with former clients
- Confidentiality — protecting trade secrets and sensitive information
Restrictive covenants must be reasonable in scope and duration to be enforceable. Courts will not enforce a covenant that goes further than necessary to protect the employer’s legitimate business interests.
Probationary Period
A probationary period gives both parties time to assess the arrangement. Common features:
- Typically 3 to 6 months
- Shorter notice period during probation
- Employer can extend probation if performance concerns remain
- The employee still has full statutory employment rights from day one
Implied Terms
Even if not written in the contract, certain terms are implied by law:
- Mutual trust and confidence — neither party will act in a way that undermines the employment relationship
- Duty to provide a safe working environment — the employer must protect the employee’s health and safety
- Duty to pay wages — the employer must pay for work done
- Duty of fidelity — the employee must act honestly and in the employer’s interests during employment
- Reasonable notice — if no notice period is specified, a reasonable period applies
Changing Contract Terms
An employer cannot unilaterally change the terms of an employment contract. Changes require:
- Employee agreement — ideally in writing
- Consultation — particularly for collective changes affecting multiple employees
- Reasonable notice of the proposed change
- A genuine business reason for the change
Imposing changes without agreement can amount to a breach of contract, giving the employee the right to claim constructive dismissal.
Contract and Payroll Records
Employment contracts interact directly with payroll processing:
| Contract Term | Payroll Impact |
|---|---|
| Salary | Gross pay calculation |
| Working hours | Overtime calculations, timesheet verification |
| Pension | Auto-enrolment contribution basis |
| Holiday | Holiday pay accrual and payment |
| Notice period | Final pay calculation on termination |
| Sick pay | SSP and company sick pay entitlement |
Employers should keep employment contracts and written statements on file for the duration of employment and for at least 6 years after the employee leaves, to support any potential tribunal claims.