What is a contract of employment?
A Contract of Employment is a legal agreement between an employer and employee setting out the terms governing their employment relationship. It can contain express contractual terms agreed between the parties as well as terms incorporated from other documents, such as relevant policies, handbooks or collective agreements.
The contract provides a clear framework for the employment relationship, covering matters such as the employee's role, pay, working hours, holiday, benefits, probation, notice and key contractual obligations.
What is it used for?
A written contract helps both the employer and employee understand what has been agreed and can reduce uncertainty and disputes about employment terms. It can also provide an important reference point when dealing with changes to employment, performance, absence, disciplinary matters, resignation or termination.
Employers must also provide employees and workers with a written statement of employment particulars containing specified information. The principal statement must generally be provided on or before the first day of employment, with certain wider particulars capable of being provided separately within two months. https://www.gov.uk/employment-contracts-and-conditions/written-statement-of-employment-particulars
Who should use it?
The template is suitable for employers and HR professionals preparing written employment terms for new employees or reviewing and updating existing contractual arrangements.
What is the difference between a Contract of Employment and a Written Statement?
A Contract of Employment sets out the contractual relationship between an employer and an employee, including the terms and conditions that have been agreed between the parties. It can contain both the terms required by employment law and additional contractual provisions that are relevant to the employment relationship.
A Written Statement of Employment Particulars is the information that an employer is legally required to provide to an employee or worker. The principal statement must generally be provided on or before the first day of employment and includes key information such as pay, working hours, holiday entitlement, place of work, job title or description, probation arrangements and notice requirements.
The two should not automatically be treated as the same document. An employment contract may incorporate the required written particulars while also containing additional contractual terms, such as confidentiality, intellectual property, restrictive covenants or specific arrangements relating to the role.
What should be included in a Contract of Employment?
A well-drafted UK Contract of Employment should clearly set out the main terms governing the employment relationship. Depending on the role and circumstances, this will normally include the employer and employee's details, job title and duties, start date, place of work, pay, working hours, holiday entitlement, probation arrangements, benefits, pension arrangements and notice periods.
Employers may also include appropriate provisions covering sickness absence, confidentiality, intellectual property, data protection, disciplinary and grievance procedures, company property, post-termination restrictions and other terms relevant to the particular role. Some provisions may be contractual, while others may be contained within company policies or procedures that are referred to in the contract.
The terms should accurately reflect the arrangements that have been agreed with the employee. Employers should avoid using generic clauses that do not apply to the role or including provisions that are unclear, unnecessarily broad or inconsistent with other employment documentation.
When should an employee receive their employment terms?
Employers should provide the employee with the required written statement of employment particulars on or before the first day of employment. The principal statement should contain the key information required by employment law, with certain additional information capable of being provided separately within the required timescale.
In practice, employers should aim to issue the full Contract of Employment before the employee starts work wherever possible. This gives both parties an opportunity to understand and confirm the agreed terms before the employment relationship begins and reduces the risk of misunderstandings about pay, working arrangements, holiday, probation or other contractual provisions.
Where an offer of employment is conditional on matters such as satisfactory references, right to work checks or other pre-employment checks, employers should ensure that the appropriate conditions have been satisfied before confirming the appointment and issuing the relevant contractual documentation.
Contractual and non-contractual terms
Not every document or statement relating to employment necessarily forms part of the employee's contract. Contractual terms are terms that form part of the legally binding agreement between the employer and employee. These can include express terms contained in the written contract as well as certain terms that may arise through legislation, collective agreements, custom and practice or other recognised sources.
Non-contractual terms are generally intended to provide guidance or explain how an organisation operates without creating a contractual entitlement. For example, an employer handbook may contain workplace procedures, management guidance or discretionary arrangements that are not intended to form part of the employment contract.
Employers should make the distinction clear when drafting employment documentation. Where a policy or handbook is intended to be incorporated into the contract, this should be stated clearly. Where it is intended to remain non-contractual, the wording should avoid inadvertently creating a contractual obligation.
Using company policies within an employment contract
Employment contracts often refer employees to the organisation's policies and procedures. This can provide a practical way of explaining how matters such as absence, disciplinary procedures, health and safety, data protection, equality and flexible working are managed.
However, employers should consider carefully whether each policy is intended to form part of the employee's contractual terms. Incorporating a policy into the contract can make changes to that policy more difficult because contractual changes may require employee agreement. For this reason, policies that need to be updated regularly are often better kept separate from the contractual terms, unless there is a specific reason to incorporate them.
The contract should therefore make clear which documents form part of the employee's contractual terms and which policies are provided as guidance or may be amended by the employer from time to time, subject to applicable employment law.
Changing an employment contract
An employment contract is a legally binding agreement, so employers should not assume that contractual terms can simply be changed whenever business requirements change. Depending on the proposed change, the employer may need to discuss the change with the employee, explain the reasons for it and obtain agreement before implementing a new contractual term.
Changes might relate to pay, working hours, duties, place of work, benefits or other contractual arrangements. Employers should consider the wording of the existing contract, any relevant collective arrangements and the circumstances surrounding the proposed change before taking action.
A clear consultation and communication process is particularly important where a proposed change may have a significant impact on employees. Once changes have been agreed, the amended terms should be confirmed in writing and the employer should ensure that its payroll, HR records and other relevant documentation are updated.
Using a Contract of Employment template
A template provides a practical starting point, but employers should adapt it to reflect the organisation, role and individual employment arrangements. The completed contract should be checked to ensure that the terms are accurate, consistent with the employee's offer and compliant with current UK employment law before it is issued.