The complete guide to UK employment contracts

An employment contract is a legally binding agreement between an employer and their employee that outlines the terms and conditions of their employment relationship. It’s usually a written document that sets out the rights, responsibilities, and duties of both the employer and the employee, including what the employee’s role will entail and the compensation they can expect in return.

It typically includes details such as job title, responsibilities, compensation, benefits, working hours, termination procedures, and confidentiality obligations. A well-drafted contract provides clarity and transparency, protects the rights of both the employer and employee, and can contribute to a positive and productive work environment.

For example, a clear contract can help prevent misunderstandings about job expectations, ensure fair compensation and provide employees with a sense of security and stability. A poorly drafted contract, on the other hand, can lead to confusion, disputes, and a negative impact on company culture and employee satisfaction.

UK employers are subject to a complex web of employment laws that govern various aspects of the employer-employee relationship.

The Employment Rights Act 1996 is a cornerstone piece of legislation, providing employees with fundamental rights such as the right to a written statement of employment particulars, paid holiday, maternity/paternity leave and protection from unfair dismissal.

Several updates have since been introduced to UK employment law, including changes to the calculation of holiday entitlement for workers with irregular hours and the introduction of a new right to request flexible working for all employees.

It is crucial for employers to stay informed about these changes and ensure compliance to avoid legal disputes and penalties. Failure to comply with employment law can result in financial penalties, reputational damage, and legal action.

In UK law, there are three recognised employment statuses: 

• Employee

• Worker

• Self-employed

Self-employed people are not concerned with employment contracts, since they work for themselves rather than for an employee. They may have written agreements or contracts with their clients, but these are not the same as employment contracts. 

While both employees and workers should have a contract or agreement with their employer, workers typically have fewer employment rights than employees. This article will focus on employment contracts for employees, although some parts of it apply to workers too. 

UK employment contracts can also be full-time, part-time, fixed-term, or zero-hour. Full-time and part-time contracts specify regular working hours. Fixed-term contracts have a predetermined end date. Zero-hour contracts offer no guaranteed hours.

The choice of contract type depends on business needs. Full-time and part-time contracts are suitable for consistent workloads. Fixed-term contracts are useful for temporary projects or seasonal work. Zero-hour contracts can provide flexibility for businesses with fluctuating workloads, but they may raise concerns about job security for employees.

Although all employment contracts are different, most of them are based on the same core framework. You can get started with your first employment contract by downloading our free template — all you need to do is fill in the specifics about your company, your new employee and the work they’ll be doing.  

Technically, an employment contract does not need to be in writing to be legally valid in the UK. However, where it gets confusing is that employers do have to provide their employees with something called a ‘written statement of employment particulars’. 

This is a written document that sets out important details of the employer relationship they’ll have with the new employee. By law, an employer has to provide the main document or ‘principal statement’ on their first day of work, and a wider statement within two months. 

So, what does this mean? Essentially, an employment contract is an agreement between you and your employees, which can be verbal or written. However, since you also have to provide a written statement to employees, in most cases this functions as the employment contract as well. 

In any case, it’s always a good idea to put an employment contract (or any contract) in writing, as this ensures that both parties understand their rights and responsibilities. If you’re ever caught up in an employment dispute, it’s much easier to argue your case if you can point to specific clauses in your employment contract — which can be difficult to prove if it’s not in writing. 

Download: Employment contract templates

We took the time to create some helpful, UK-specific employment contract templates to help your organisation sign your next great hire. Download them today for free.

Download them now

If you’ve never created a contract before, it’s a good idea to get some professional help. You might want to consider asking a lawyer or HR expert to help you create your first few contracts.

The employer must provide a written statement of particulars, which consists of the main document (known as a ‘principal statement’) and a wider written statement. 

The principal statement must include at least:

• the employer’s name

• the employee’s or worker’s name, job title or a description of work and start date

• how much and how often an employee or worker will get paid

• hours and days of work and if and how they may vary

• holiday entitlement

• where an employee or worker will be working

• how long a job is expected to last

• how long any probation period is and what its conditions are

• any other benefits

• obligatory training, whether or not this is paid for by the employer

A wider written statement should include information about:

• pensions and pension schemes

• collective agreements

• rights to non-compulsory training provided by the employer

• disciplinary and grievance procedures

You can find full details of the written statement of particulars and the minimum information it must include on the gov.uk website. 

Here's a checklist for what else to include:

• Parties: Clearly identify the employer and employee.

• Job title and description: Define the employee's position and responsibilities.

• Commencement date: Specify the start date of employment.

• Probationary period: Outline the trial period during which the employer can assess the employee's suitability.

• Compensation: Detail the employee's salary, wages, bonuses, and any other forms of pay.

• Benefits: Specify the benefits provided, such as pension, paid time off and company perks.

• Working hours: Define regular working hours and overtime arrangements.

• Termination clause: Outline the conditions for terminating the employment relationship, including notice periods and reasons for termination.

• Non-compete clause: Consider including a non-compete clause to protect the employer's interests, especially for employees with access to sensitive information or proprietary knowledge.

• Confidentiality agreement: Require the employee to maintain confidentiality of the employer's proprietary information.

• Restrictive covenants: Explore other restrictive covenants, such as non-solicitation or non-disclosure clauses, if appropriate.

• Severance pay: Specify any severance pay entitlements in case of termination.

• Dispute resolution: Outline the procedure for resolving disputes, such as mediation or arbitration.

• Governing law: Indicate the governing law of the contract.

• Executive roles: Consider including additional provisions such as equity grants, performance bonuses, and severance packages.

• Sales roles: Include commission structures, sales quotas and non-solicitation clauses to protect the employer's customer base.

• Technical roles: Address intellectual property rights, invention assignment agreements, and confidentiality obligations related to proprietary technology.

• Remote workers: Specify remote work arrangements, including equipment provided, reimbursement for expenses, and communication protocols.

• Seasonal or temporary workers: Clearly define the duration of employment and any specific terms or conditions applicable to these roles.

In the UK, employment contracts do not need to be in writing. However, it is strongly recommended to have a written contract to avoid misunderstandings and provide clear evidence of the terms and conditions of employment.

A written contract can help protect the rights of both the employer and employee, and it can also be used as a reference in case of disputes. While an oral agreement can be legally binding, a written contract provides greater clarity and certainty.

Verbal agreements can be risky due to their lack of written evidence. They can be advantageous for quick decisions and informal arrangements, but they can also lead to misunderstandings and disputes. Here are examples of how that may happen:

1. Freelance project: A freelance graphic designer agreed verbally with a client on the project scope, deadline and payment terms. However, a dispute arose when the client requested additional changes without adjusting the payment. The lack of a written contract made it difficult to prove the original agreement, leading to a legal battle.

2. Employment contract: An employee was verbally promised a promotion and salary increase in exchange for staying with the company. When the promised promotion and increase were not forthcoming, the employee filed a complaint. The lack of a written agreement made it challenging to prove the verbal promise, resulting in a legal dispute.

While verbal agreements can be convenient, it is generally advisable to have written contracts in place to avoid misunderstandings and provide clear evidence of the terms of the agreement.

The ‘terms’ of a contract are the parts that are legally binding. Generally, an employment contract includes a combination of specific terms, and implied terms. Specific terms: These are the legal terms that apply to your relationship with the employee in question. These don’t necessarily have to appear in a written contract. According to the gov.uk website, they could also be:

• In an employee handbook

• On a company noticeboard

• In an offer letter

• Stated in collective agreements with trade unions or staff associations

When a contract term is stated somewhere other than in the actual written contract itself, it’s sometimes known as an ‘incorporated term’. It’s a good idea to note which other sources are relevant to the contract in the contract itself. Implied terms: These are terms that are not officially stated in a contract, but which are implied either by the employee’s statutory rights or by common assumption. Implied terms might include:

• That the employee must not lie, cheat or steal from their employer

• That the employer must provide safe and secure working conditions

• Something that is specifically necessary for the job, like a delivery driver having a valid driving licence

Implied terms may also include things relating to the employee’s statutory rights, like the right to 5.6 weeks of paid holiday per year. Even if this is not explicitly stated in the contract, it’s still a part of it because it’s a legal right. Other terms might be implied because of the way things have always been done in the organisation. For example, if your company has always given every employee a Christmas bonus, it’s reasonable for employees to expect that this will apply to them too. This could form part of their contract, and you could be penalised if you don’t provide it.

If you need to create your own employment contract, you have three main options: Write your employment contract from scratch, ask a lawyer to draw up a contract for you or use an employment contract template as a starting point. Here's what to do:

1. Gather necessary information: Before drafting an employment contract, gather essential details such as the job description, company policies, industry standards and legal requirements. This information will help you tailor the contract to the specific needs of the role. 2. Choose a template: Use an existing template from your HR department or legal team, or consider purchasing a pre-written template. Online tools can also help you create customised contracts. 3. Customise the template: Modify the template to reflect the specific job requirements and responsibilities. Ensure the contract includes all necessary components, such as parties, job title, compensation, benefits, working hours, termination clauses, confidentiality agreements, and dispute resolution. Consider industry-specific provisions for roles like sales, technical, or remote work.

4. Review and seek legal advice: Have the contract reviewed by your HR department or legal team. If necessary, consult with an employment attorney to ensure compliance with all applicable laws and regulations.

5. Sign and distribute: Once the contract is finalised, obtain signatures from both the employer and employee. Provide the employee with a copy of the signed contract. Once the contract is written, here are some important best practices to bear in mind in relation to how to organise your contracts:

• Create contracts for all employees and workers: To make sure your company is protected, it’s important to have contracts in place for all of your staff — not just full-time employees. Part-time workers and temporary, seasonal or fixed-term employees should all have a contract too. 

• Keep your contracts up to date: Whenever an employee’s role, salary or working conditions change, you should update their contract. This ensures that each employee’s contract is reflective of the actual job they do — not what it looked like several years ago. 

• Include contract terms in your employee handbook: It’s a good idea to include information that may change over time in your employer handbook rather than in each individual employment contract. This makes it easier to make changes without having each employee sign a new contract. 

• Store signed copies of contracts safely: Employee contracts should be signed by both parties and stored safely. However, this doesn’t mean that you need to store and sign physical copies: you could use an HRIS solution like Personio to digitally sign and store your employees’ contracts so that they’re easily accessible whenever you need them. 

Writing, signing, storing and updating employment contracts can be a lot of work — but an HR solution like Personio can help you to manage the load. 

Using Personio, you can create custom templates for employment contracts (and any other HR document you need). This means you don’t need to start from square one every time you hire a new employee — you can just fill in a few key details and have your contract ready to go. 

Personio’s electronic signature solution allows you to quickly, easily and legally sign employment contracts and send them through to your new employees for signature — saving you time, paper and money. All contracts are securely stored in your employees’ digital file, and you can easily make changes or renew a contract when you need to. You’ll even get automated notifications when a contract is about to expire. 

Digital tools can significantly streamline contract management. Electronic signatures eliminate the need for physical paperwork, while automated updates and reminders ensure timely renewals and compliance.

Leading HR software solutions like Personio offer various features to support contract management, including centralised repositories, version control, automated workflows and integration with other HR systems. Some popular features to consider when evaluating HR software include:

• E-signature capabilities: Securely capture electronic signatures for contracts and agreements.

• Contract lifecycle management: Track contract creation, negotiation, execution, and renewal processes.

• Automated reminders: Send timely notifications for contract renewals, expirations, and required actions.

• Version control: Maintain a history of contract changes and revisions.

• Integration with other HR systems: Seamlessly connect contract management with HR information systems for a unified view of employee data.

Either an employer or an employee can end an employment contract. When an employee wants to end their contract, they need to give you notice according to the terms set out in their contract. 

If an employer wants to end the contract, there are specific rules to be followed depending on whether it’s a dismissal (i.e. firing an employee) or a redundancy (i.e. their role isn’t needed any more). 

When an employer wants to dismiss an employee, they need to have a fair and valid reason, or they could face claims and penalties for unfair dismissal.  Employers should consult the Acas Code of Practice on disciplinary and grievance procedures to ensure they’re handling dismissals fairly and legally. 

UK employers must follow fair dismissal procedures when terminating employees, including consultation, a fair reason and a fair procedure. Failure to comply can lead to legal disputes. Employers should communicate clearly, offer support, maintain confidentiality and document everything during sensitive terminations.

Still have questions about UK employment contracts? Here are the answers to some FAQs. 

Every employee should have an employment contract, but this does not necessarily have to be in writing. However, an employer must give their employees a written statement describing their rights and responsibilities when they start work. 

Any contract of employment between an employer and an employee in the UK is legally binding, whether or not it’s a written document. As soon as the employer offers the employee a post and the employee accepts it, there is a contract in place. 

Well-drafted contracts are essential for protecting your business and fostering strong working relationships. They provide clarity, transparency, and legal protection for both employers and employees.

By ensuring contracts are clear, comprehensive, and compliant with relevant laws, HR managers can minimise legal risks, avoid misunderstandings, and maintain a positive work environment. Regularly reviewing and updating contracts is crucial to stay compliant with changing regulations and adapt to evolving business needs.

Want to learn how Personio can take the hassle out of managing contracts for your UK employees? Book a free demo to find out more.