Do employees need a contract of employment?

If you think a contract of employment is just another bit of box ticking and no one ever looks at them, think again. While you don’t need to have one in writing it certainly helps to clarify things, especially if there is a dispute down the line.

In April 2020, new rules were introduced which make it compulsory for employers to provide an employee with document stating the main conditions of employment when they start work. This is known as a ‘written statement of employment particulars’ and differs from a contract.

The written statement is made up of:

• the main document (known as a ‘principal statement’)
• a wider written statement

The employer must provide employees who commenced work before 6th April 2020 with the principal statement on (or before) the first day of employment and the wider written statement within 2 months of the start of employment.

In this guide we look at contracts and written statements of work and explain how they differ.

The principal 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 (also if employees or workers will have to work Sundays, nightsor overtime)
• Holiday entitlement(and if that includes public holidays)
• Where an employee or worker will be working and whether they might have to relocate
• If an employee or worker works in different places, where these will be and what the employer’s address is
• How long a job is expected to last (and what the end date is if it’s a fixed-term contract)
• The length of the probation period and any terms and condition which apply
• Any other benefits (for example, childcare vouchers and lunch)
• Obligatory training, whether or not this is paid for by the employer
• If the worker is required to work outside the UK for over a month; arrangements for working outside the UK (including period, currency of pay, additional pay and benefits and return terms)
• The date that a previous job started if it counts towards a period of continuous employment.

Other information the employer must provide on day one

On the first day of employment the employer must also provide the employee or worker with information about:

• Sick pay and procedures
• Other paid leave (for example, maternity leave and paternity leave)
• Notice periods

The employer can choose whether to include this information in the principal statement or provide it in a separate document. If they provide it in a separate document, this must be something that the employee or worker has reasonable access to, such as on the employer’s intranet.

The wider written statement

Employers must give employees and workers a wider written statement within 2 months of the start of employment. This must include information about:

• Pensions and pension schemes
• Collective agreements
• Any other right to non-compulsory training provided by the employer
• Disciplinary and grievance procedures

What is a contract of employment?

A contract of employment exists between employer and employee and forms the basis of the employment relationship. Generally speaking, it covers details such as working hours, scope of the job, holiday entitlement, sick pay, benefits and an employee’s duties and responsibilities.

A contract, whether written or not, comes into force as soon as the employee accepts their job offer.

Why should employers provide their employees with a contract of employment?

Providing written employment contracts is important because it ensures clear terms for both sides. Sadly, some business relationships are rockier than others. Having comprehensive employment contracts can protect both parties and avoid costly litigation down the line.

An employment contract allows you to be specific about terms. This can be especially important if you want to protect trade secrets, include non-compete agreements or if your employees will be working with sensitive or copyrighted material.

It also allows both you, and your employee, to refer back in the event of a future dispute and can be used as evidence if necessary.

Finally, a written employment contract helps promote good working relationships between you and your employee. It shows you as an organised and efficient employer who provides a solid working structure.

What should a contract of employment include?

A contract of employment will include explicit and implied terms.

Implied terms are those things which may not be written down but are considered part of the contract. These could include not stealing from an employer, having a full driving licence and providing a safe place in which to work.

Explicit contract terms will include details like the job responsibilities and duties, remuneration, legal requirements and benefits.

Statutory terms may be implied or explicit and will be imposed by an Act of Parliament or statutory instrument, such as the right to be paid the minimum national wage.

Learn more about what to include in a contract of employment.

The different types of employment contract

• Full-time employment contracts – These are usually used for full-time, permanent members of staff and will set out salary or hourly pay, holiday entitlement, pensions, sick pay and benefits.
• Part-time contracts – Part-time staff work less than full-time but they’re still often in permanent positions so this type of contract will contain many of the same terms as a full-time contract with some of them on a pro-rata basis.
• Fixed-term contracts of employment – These last for a set amount of time which is agreed in advance. It might not specify a specific amount of time but rather when a project is finished. Fixed-term contracts include many of the same rights given to permanent staff although certain things, such as holiday entitlement or benefits, depend on the length of contract.
• Temporary employment contracts - These are similar to fixed-term contracts but there may be more flexibility on the end date depending on demand. There may also be increased flexibility for temporary contracts allowing workers to manage study or other commitments around the work.
• Agency contracts - Agency staff will have their contract agreed and managed by their recruitment agency and it will be down to the agency to make sure workers’ rights are protected.
• Freelancers and contractors contracts – These contracts vary in each individual case. They can include start/end dates and remuneration for a particular project or rate of pay.
• Zero-hours contracts – These contracts mean an employee will only work when required by the employer. A zero-hours worker however, can look for employment elsewhere and such a contract would not be valid if it stopped them from doing so.

Learn more about zero-hours contracts.

What should you do if the contract of employment needs to be varied or terminated?

A contract can be varied by both employer and employee. An employer might do so because of changes in economic conditions or business reorganisation.

An employee might wish to negotiate better terms such as increased pay, a change to their job role or different benefits.

Changes can only be made with the agreement of both parties and should ideally be in writing. You should consult with your employee and explain any changes you wish to make.

How can I get help writing a contract of employment?

Writing an employment contract can feel like a daunting prospect for anyone without an HR specialism. Here are two potential options:

1. Use a contract of employment template such as the one in our Contract of Employment Guide.
2. Work with an independent HR provider or consultant. They will be able to create a custom contract of employment for your employees and advise you if you need extra support. You can find an HR provider in your local area by using our HR partner directory.