Employment Contracts: What Must Be Included by Law

Every UK business owner employing staff must provide a clear and legally compliant employment contract. This document sets out the rights and responsibilities of both employer and employee, helping to prevent misunderstandings and potential disputes. Knowing what must be included by law in an employment contract is essential for managing your workforce effectively and staying compliant with employment legislation.

What Is a Written Statement of Particulars?

Under the Employment Rights Act 1996, employers are legally obligated to provide a written statement of particulars to every employee within two months of starting work. This is not the same as a full employment contract but forms the core information that must be communicated in writing. It serves as a minimum standard ensuring employees understand the key terms of their employment.

The written statement must be signed by the employer or a representative and given to the employee. If there is no written contract beyond this statement, the information contained within it will form the basis of the employment relationship.

Mandatory Contents of an Employment Contract

The Employment Rights Act 1996 specifies that the written statement must include certain essential particulars. These details provide clarity and help avoid disputes by clearly defining the working relationship.

The minimum required information includes:

• Names of employer and employee: Full legal names of both parties.
• Job title or a description of work: A clear description of the role and duties.
• Start date of employment: The exact date when employment commenced.
• Place of work: The location where the employee will perform their duties, or a note that the employee may be required to work at different locations.
• Hours of work: Normal working hours, including information on shift patterns or overtime expectations.
• Pay details: Salary or wage rate, how often payment is made, and any other pay-related information such as bonuses or commission.
• Holiday entitlement: The number of holiday days, including public holidays and how entitlement is calculated.
• Notice periods: Required notice from both employer and employee to terminate the contract.
• Sick pay: Eligibility and terms for Statutory Sick Pay (SSP).
• Collective agreements: Details of any collective agreements affecting terms and conditions.
• Disciplinary and grievance procedures: How disciplinary issues and grievances will be handled.

For example, if your employee is entitled to 28 days’ annual leave including bank holidays, this must be clearly stated. Similarly, if the job requires working particular shift patterns, this needs to be included.

Optional but Recommended Clauses

While the law sets out the minimum requirements, many employers include additional clauses to protect their business interests and clarify expectations. These can cover areas such as confidentiality, intellectual property, and restrictive covenants (non-compete and non-solicitation clauses).

Other common contractual clauses include:

• Confidentiality: Protecting sensitive business information.
• Data protection: Compliance with UK GDPR and how employee data will be processed.
• Probationary period: Terms during a trial phase of employment.
• Training and development: Expectations around training obligations.
• Health and safety obligations: Employer’s and employee’s responsibilities under the Health and Safety at Work Act 1974.

It is important that any additional terms comply with UK law and are clearly explained. Vague or unfair clauses can be challenged and may be unenforceable.

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How to Create or Update an Employment Contract

When hiring new employees or updating existing contracts, it is crucial to follow a clear process to ensure your contracts are legally valid and reflect your current working practices. ACAS provides useful guidance on employment contracts and changes.

Practical Steps for Drafting or Amending Contracts

1. Review legal requirements: Start by checking the minimum particulars required by the Employment Rights Act 1996.
2. Draft clear and plain language terms: Avoid legal jargon to ensure employees understand their rights and obligations.
3. Include any bespoke clauses: Tailor the contract to your business needs without breaching statutory rights.
4. Consult employees: Discuss proposed contracts or changes and obtain written consent for amendments.
5. Provide the contract in writing: Give new employees their written statement within two months of starting work; provide updated contracts promptly when terms change.
6. Keep signed copies: Retain copies for your records and provide employees with their own signed versions.

Remember that changes to contracts must be agreed by both parties. Unilateral changes by employers can lead to claims for breach of contract or constructive dismissal.

Legal Risks of Not Having a Compliant Contract

Failing to provide a compliant written statement or employment contract can expose a business to several risks:

• Employment tribunal claims: Employees can claim if they do not receive a written statement within the statutory timeframe.
• Unclear terms leading to disputes: Ambiguity around pay, working hours, or notice periods can cause disagreements and costly litigation.
• Difficulty enforcing restrictive covenants: Without clear contract terms, protecting your business interests is more challenging.
• Non-compliance fines: While there are no direct fines for missing written statements, non-compliance can increase liabilities in tribunal cases.

Providing a clear, legally compliant contract is a fundamental part of good HR practice and helps maintain positive employment relationships.

Additional Considerations

Besides the written statement, employers must also consider other aspects that impact employment contracts:

• Equality and discrimination: Contracts must not include discriminatory terms contrary to the Equality Act 2010.
• Data protection: Ensure compliance with UK GDPR when handling employee personal data.
• Working time regulations: Contracts should align with rules on maximum working hours and rest breaks.
• Temporary or zero-hours contracts: These require clear terms to avoid ambiguity about hours and pay.

For more information, see our related articles on Zero-Hours Contracts and Employee Data Protection.

Note: Employment law can be complex and subject to change. Small business owners should seek professional legal advice tailored to their specific circumstances to ensure compliance.