A solid employment contract is one of the most useful things a small employer can have. It sets clear expectations, reduces disputes, and demonstrates that you take your legal duties seriously. Here is exactly what yours needs to cover.
This article is general information, not legal advice. Employment and data rules change, so always check the latest guidance on GOV.UK or speak to a qualified adviser.
Contract vs Written Statement: What Is the Difference?
An employment contract exists the moment an employee accepts a job offer — even verbally, and even before anything is written down. The terms of the contract come from what was agreed, from statute, and from custom and practice in your workplace.
A written statement of employment particulars is the legal document you must give every employee and worker. Since April 2020, this must be provided on or before the first day of employment. It does not replace the contract — it is evidence of the key terms.
In practice, most employers combine the two into a single employment contract document that also satisfies the written statement requirement. That is perfectly fine, and it is what most HR templates do.
What the Law Says You Must Include
Employment law specifies two tiers of information. Some must be in a single principal statement (the main document); other information can be in a separate document such as a staff handbook. The principal statement must include:
- The employer's name and address
- The employee's name, job title, and start date
- Pay — the rate or method of calculation, and when it is paid
- Working hours — days of the week and whether hours may vary
- Holiday entitlement, including public holidays, and how holiday pay is calculated
- Location of work or, if the employee works at multiple sites, a statement of that
- Whether the job is permanent or, if fixed-term, the expected end date
- Notice periods required from both sides
- Any probationary period, including its length and conditions
- Other benefits not covered elsewhere (for example, vouchers or health insurance)
- Mandatory training requirements and whether these are paid
Additional information about sick pay, other absence policies, pensions, and disciplinary and grievance procedures can be given separately, but must be clearly referenced in the principal statement.
A well-written contract is not about catching people out — it is about making sure everyone starts the working relationship on the same page.
Key Clauses to Get Right
Pay and Pay Review
State the gross salary or hourly rate clearly. Make sure it is at or above the National Living Wage or National Minimum Wage for the employee's age — rates change each April, so check GOV.UK before issuing or updating contracts. You can include a clause saying pay will be reviewed annually, but be careful: a review clause does not guarantee an increase.
Hours of Work
Specify the normal working hours and days. If you need flexibility, you can include provisions for overtime or variable hours, but be precise about how these work. Vague wording causes disputes. Workers have the right not to work more than 48 hours per week on average under the Working Time Regulations, unless they have opted out in writing.
Holiday Entitlement
State the annual leave entitlement in days or weeks. Full-time employees are entitled to at least 5.6 weeks (including bank holidays if you choose to count them that way). Spell out your leave year, how to book leave, and any restrictions on when leave can be taken. For irregular-hours workers, holiday calculation rules were updated in recent years — check GOV.UK for the correct method.
Notice Period
Both you and your employee need to know how much notice is required. The statutory minimum is one week per year of employment (up to a maximum), but you can contract for longer. Many employers use one month each way for salaried staff.
Probationary Period
Since 2020, the probationary period must be mentioned in the written statement. State its length and what happens at the end — for example, whether it can be extended. Be aware that employees still have some employment rights during probation; they do not start from zero.
Clauses You May Want but Are Not Required
Depending on your business, you may also want to include:
- Confidentiality — protecting business-sensitive information
- Intellectual property — confirming that work created in the course of employment belongs to the business
- Restrictive covenants — such as non-solicitation of clients after leaving; these must be reasonable to be enforceable, so take legal advice if you want to include them
- Social media policy — referencing a separate policy on acceptable use
Keeping Contracts Up to Date
A contract is only as useful as it is current. If terms change — a pay rise, a change of role, new working hours — you need to record the change in writing. You cannot unilaterally change a contract; in most cases you need the employee's agreement. Give written notice of any change and ask the employee to acknowledge it. If you are making significant changes, take advice first.
It is also worth reviewing your template contract periodically — employment law changes, and a contract written several years ago may no longer reflect current requirements. If you are also sorting out your obligations around leave, see our guide to Statutory Sick Pay and leave for a useful companion checklist.
Employment Contract Checklist
- Issue a written statement on or before the employee's first day
- Include all principal statement items required by law (see list above)
- Confirm pay is at or above the correct National Minimum or Living Wage rate for the employee's age
- State holiday entitlement clearly, including how bank holidays are treated
- Specify notice periods for both sides
- Include probationary period length and conditions
- Reference where disciplinary, grievance, and absence policies can be found
- Get the employee to sign and date a copy, and keep a signed copy yourself
- Record any later changes to terms in writing with the employee's agreement
- Review your template at least every two years or whenever the law changes
