Since 6 April 2020, all employees and workers must receive a written statement of employment particulars on or before their first day of work. Previously, employers had up to two months. This written statement is, in practice, your employment contract, and getting it right is essential.
A well-drafted contract protects your business, sets clear expectations, and avoids costly disputes down the line. A poorly drafted one, or worse, no contract at all, leaves you vulnerable to misunderstandings, tribunal claims, and difficulty enforcing even basic terms.
Here is what the law requires you to include and the additional clauses we recommend for every UK employer.
Mandatory terms from day one
The Employment Rights Act 1996 (as amended) sets out the information that must be included in the written statement and provided on or before the employee's first day. These are:
- Employer's name and address. The full legal name of the employing entity, not just a trading name.
- Employee's name, job title, and start date. The job title or a brief description of the work. If the title is vague, a clear description of duties is even more important.
- Date continuous employment began. This is critical for calculating statutory rights such as unfair dismissal qualification, redundancy pay, and notice periods. If the employee had previous service with a connected employer (or if TUPE applies), the continuity date may be earlier than the start date.
- Pay rate, frequency, and method. Salary or hourly rate, how often they are paid (weekly, monthly), and the method (BACS, cheque). Include details of any overtime rates or bonus schemes.
- Hours of work. Normal working hours, days of the week, and whether overtime may be required. If hours vary, explain how they are determined.
- Holiday entitlement and holiday pay. The amount of annual leave (the statutory minimum is 5.6 weeks for a full-time worker), including whether it includes bank holidays, and how holiday pay is calculated.
- Place of work. A specific address or, if the employee works at multiple locations, a statement that they are required or permitted to work at various places with a note of the employer's address.
- Probationary period and conditions. The length of any probationary period, what happens at the end of it, and any different terms that apply during probation (such as shorter notice periods). Our guide on probationary periods explains how to structure these effectively.
- Any training requirements. Whether the employee must complete any training and whether that training is at the employer's or employee's expense.
Additional mandatory terms
The following information must also be provided, but can be included in a separate document (such as a staff handbook) that is reasonably accessible to the employee:
- Sick pay and absence reporting procedures. Whether you offer company sick pay above SSP, how sickness should be reported, and when fit notes are required.
- Pension arrangements. Details of any workplace pension scheme, including auto-enrolment obligations.
- Notice periods. The notice required from both the employer and the employee to end the contract. These can never be less than the statutory minimum. For a full explanation of how statutory and contractual notice periods work, see our guide to notice periods in the UK.
- Fixed-term end date. If the contract is for a fixed term, the expected end date or the event that will bring it to an end.
- Collective agreements. Details of any collective agreements with trade unions that directly affect the employee's terms and conditions.
- Disciplinary and grievance procedures. Either set out in the contract or a reference to where they can be found (typically the employee handbook).
Recommended additional clauses
Beyond the legal minimum, the following clauses help protect your business and avoid disputes. We strongly recommend including them in every contract.
Restrictive covenants
These clauses restrict what an employee can do after they leave your business. The most common types are:
- Non-compete. Prevents the employee from working for a competitor for a specified period after leaving.
- Non-solicitation. Prevents them from approaching your clients to take their business elsewhere.
- Non-dealing. Prevents them from doing business with your clients, even if the client approaches them.
- Confidentiality. Prevents disclosure of confidential business information.
For restrictive covenants to be enforceable, they must be reasonable in scope, duration, and geographical area. Courts will not enforce a restriction that goes further than necessary to protect a legitimate business interest. A 3 to 6 month restriction is common for standard roles, while 12 months is more typical for senior positions with access to sensitive information.
Garden leave clause
Garden leave allows you to require the employee to stay at home during their notice period while remaining employed and on full pay. This is particularly useful when an employee is leaving to join a competitor, as it prevents them from accessing clients, colleagues, and confidential information during their notice period.
Without a garden leave clause in the contract, you cannot unilaterally impose it. The employee could argue they have a right to work and refuse to stay at home.
Deductions clause
This gives you permission to deduct specific amounts from the employee's final pay, such as overpayments of salary, outstanding loans, or training costs if they leave within a specified period. Without this clause, making deductions from wages can be unlawful under the Employment Rights Act 1996, even if the employee genuinely owes you money.
Intellectual property clause
If your employees create anything in the course of their work, such as designs, software, content, or inventions, you should specify that the intellectual property belongs to the employer. Under the Patents Act 1977 and the Copyright, Designs and Patents Act 1988, most work created during employment already belongs to the employer, but a clear clause removes any ambiguity.
Right to vary clause
This clause reserves the right to make reasonable changes to the employee's terms and conditions with appropriate notice. However, be cautious. A "right to vary" clause does not give you a blank cheque to change fundamental terms like pay, hours, or location. Significant changes without genuine agreement can still amount to a breach of contract or constructive dismissal.
Common mistakes with employment contracts
After reviewing hundreds of contracts for small businesses, these are the mistakes we see most often:
Using a free template without tailoring it. Generic templates downloaded from the internet are often out of date, drafted for a different jurisdiction, or missing clauses relevant to your business. A contract needs to reflect your actual working arrangements, not a one-size-fits-all standard.
Not issuing contracts on day one. The legal deadline is the employee's first day of work. An employee who does not receive a written statement can bring a claim to an employment tribunal and be awarded two to four weeks' pay in compensation. This is on top of any other claims they might bring.
Not updating contracts when the law changes. Employment law changes regularly. If your contracts were last reviewed before April 2020, they may be missing required terms. If you have not updated them since April 2024, they may not reflect the new flexible working provisions.
Including terms that conflict with your handbook. If your contract says one thing and your handbook says another, you have a problem. Employees are entitled to rely on whichever term is more favourable to them. Keep the contract for individual terms and the handbook for policies, and make sure they do not contradict each other.
Not having contracts at all. This is more common than you might think, particularly in very small businesses. Even if you have a verbal agreement, it is legally and practically inadequate. You are breaking the law, and you have almost no protection if a dispute arises.
Contract vs handbook
A common question we get from business owners is what goes in the contract and what goes in the handbook. The answer is straightforward.
The contract covers the individual terms that are specific to each employee: their job title, pay, hours, start date, notice period, and any restrictive covenants. These terms can only be changed with the employee's agreement.
The handbook covers the policies and procedures that apply to everyone: disciplinary procedures, sickness absence policy, equal opportunities, social media use, and so on. If you are not sure which policies your handbook needs, our guide to the HR policies every small business needs covers the essentials. If you include a clause in the contract stating that the handbook is non-contractual, you retain the flexibility to update these policies without needing individual employee consent.
Cross-reference between the two. The contract should direct employees to the handbook for details of disciplinary procedures, sickness absence arrangements, and other policies.
Getting your contracts right
Employment contracts are one of the most fundamental parts of your HR setup. They set the tone for the employment relationship and protect both sides when things do not go as planned.
If your contracts need updating, or if you have not issued them at all, our contracts of employment service can help. We draft bespoke contracts tailored to your business, your roles, and your commercial needs.
If you are setting up a new business and need contracts alongside your other HR foundations, our new business support package covers everything you need to get started on the right footing.
Book a free consultation to discuss your requirements.
