Every employee that you hire will need some kind of employee contract, be that verbal and/or in writing.

This makes it clear to you and the employee where you both stand on critical elements of the role such as hours, pay and disciplinary procedures.

We’ll take you through the most important parts of an employee contract alongside a contract template to give you a solid idea of what the document should look like.

What is an employment contract?

An employment contract is a legal document which outlines an employee’s duties, responsibilities, benefits and compensation, among other things. An employment contract is between an ‘Employer’ and an ‘Employee’.

An employment contract should set out employment conditions, rights, responsibilities and duties. These are the ‘terms’ of the contract and the terms are legally binding, so make sure you’re crystal clear before you give the document to your employee to sign. You and your employee have to honour the contract until it ends or until the terms have changed (but you must give a month’s notice if you decide to do that).

Codes of conduct must be easily accessed by employees, say, in an employee handbook, intranet or on a noticeboard. The contract terms should also be in the offer letter from the employer. This applies if your staff member is full-time, part-time or follows another kind of working pattern.

Collective agreements, such as those between trade unions and staff associations, make room for negotiations of these terms, such as pay and working hours. The terms could cover how negotiations will be organised, who will represent employees, which employees are covered by the agreement and precisely which terms and conditions the agreement will cover.  

‘Implied terms’ are also part of the contract, even if they’re not in writing. They’re common sense, really. It could be employees not stealing from their employer or you as an employer providing a safe working environment for your member of staff.

Why do I need an employment contract?

An employment contract clarifies any grey area before the period of employment formally begins. It also protects both parties in the event of a dispute.

What about contractors?

A one-off job for a contractor would look different and be referred to as a ‘contract to provide services’ rather than an employee contract. Be sure you’re clued-up on IR35 (off-payroll) rules before you go ahead.

Ensure you include:

• Name and contact details of both parties
• The range of services expected
• Compensation and expenses
• Disputes
• Termination

Employment contract template

Glance over the PDF template below to see what your employment contract should look like. It can be edited with names, locations, employee benefits and anything else you need to tweak.

Statement of particulars

Let’s go into more detail. The information (i.e. the statement of particulars) you give an employee can be broken down into two: a principal statement and a written statement. As an employer, you must give employees and workers the principal statement when they start in the role, which looks like the contract template above.

You must provide the principal statement on the first day of employment and the written statement within two months of the start date.

The principal statement has to include:

• The employer’s name
• The employee’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 (you must mention if employees or workers will have to work on Sundays, during the ‘night period’ or take 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)
• How long any probation period is and what its conditions are
• Any other benefits (for example, childcare vouchers and lunch)
• Obligatory training, whether or not this is paid for by the employer

On day one, you must also tell the employee about sick pay and procedures, other paid leave (such as parental leave) and notice periods. It can be included in the principal statement or in a separate document. Be aware that if it is in a separate document, it should be accessible, such as on the employee intranet or handbook.

It must also include the date that a previous job started if it counts towards a period of continuous employment.

What about the written statement?

Meanwhile, the written statement must include information on pensions and pension schemes, collective agreements, disciplinary and grievance procedures and your rights to any non-compulsory training provided by the employer.

Note that, if an employee has a problem receiving their written statement, you’ll be the first person they speak to. If talks with you don’t work, they can file a grievance or take their case to the employment tribunal.

What happens if your small business is taken to an employment tribunal? – Step-by-step guide to what happens if you are unfortunate enough to be taken to an employment tribunal

What if there’s a breach in the employment contract?

Ideally, your contract should cover any breaches or disputes that may arise. You’re at risk because your employee could resign and make a claim against you for, say, constructive or unfair dismissal. That’s why it’s best to have an open door policy and encourage employees to come to you with problems in the first instance.

Read more

Important employment rights checklist for employers – As an employer, it’s important that you keep track of your employees’ employment rights, so you don’t find yourself on the wrong side of the law

Employment Rights Bill – what’s in the legislation? We take a look at Labour’s Employment Rights Bill and how the business community has reacted to the measures

The ten most common HR challenges for small businesses – Here, we look at the top ten most common small business HR challenges, and what you can do to overcome them