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<h3>Employment agreements in UK law</h3>
<p>Employment contracts are crucial for establishing clear and compliant working relationships between employers and employees. A well-drafted contract defines the rights and responsibilities of both parties and helps businesses avoid legal disputes.</p>
<p>Employment law can be a thorny area of law, as <a href="https://www.linnearlegal.co.uk/preview/?post_id=1428&amp;previewPathname=%2F%3Fp%3D1428&amp;p=1428&amp;preview=true">we discussed in our overview of UK employment law.</a> With this in mind, businesses should identify and mitigate against any possible areas of concern. In this article, we outline what employment contracts are, why they’re important, statutory requirements and the risks of not drafting comprehensive employment contracts.</p>
<h3>What is an employment contract?</h3>
<p>Employment contracts are legally binding agreements between employers and employees. Like terms and conditions, they stipulate each party&#8217;s expectations regarding rights, responsibilities and obligations. They also serve to protect employers and employees while providing a blueprint for their relationship.</p>
<p>Typically, an employment contract is a written document that sets out details such as job title, compensation, benefits and working hours.</p>
<h3>Why employment contracts are important</h3>
<p>Technically, an employment contract doesn’t have to be in writing to exist – it’s formed as soon as an employee accepts a job offer. But this can potentially open up a can of worms for both parties, as the implied terms of the contract will be unclear, and this is what often leads to disputes.</p>
<p>To avoid this, it’s advisable to draft a written contract. A well-drafted employment contract provides the employee with clarity and transparency about their role, which can be instrumental when fostering positive and productive working environments. By the same token, not having a well-drafted contract can increase the risk of confusion, disputes and low employee satisfaction.</p>
<p>An employment contract can also provide protective provisions for the employer with regard to:</p>
<ul>
<li><strong>Intellectual property (IP)</strong>, ensuring the company owns all IP created by employees while working for the business</li>
<li><strong>Restrictive covenants</strong>, such as non-compete or and non-poaching clauses, and</li>
<li><strong>Confidentiality obligations </strong>to safeguard sensitive business information, trade secrets and client data.</li>
</ul>
<h3>Legal requirements for employers</h3>
<p>Employers are not legally required to provide prospective employees with employment contracts. But they are legally required to provide the following:</p>
<ul>
<li><strong>A principal statement</strong>: under the <a href="https://www.legislation.gov.uk/ukpga/1996/18/contents">Employment Rights Act 1996</a>, this must be provided by the first day of employment</li>
<li><strong>A wider or full written statement of particulars</strong>: this must be provided within two months of the employee’s start date</li>
</ul>
<p>An employment contract will usually contain much more than just these statements – it can include implied duties, specific company policies, protection for employers and other provisions that are not required to be set out in the principal statement or written particulars.</p>
<p>The information that an employer is legally required to give an employee is as follows.</p>
<h4>Principal statement</h4>
<p>The initial principal document, which must be provided to the employee by day one of employment, needs to include the following information as a minimum:</p>
<ul>
<li>The employer’s name</li>
<li>The employee’s name and job title or description</li>
<li>The employee’s start date</li>
<li>The amount of compensation the employee will receive</li>
<li>Working hours</li>
<li>Holiday entitlement</li>
<li>Where the employee will be expected to work</li>
<li>Length and conditions of probation period</li>
<li>Other benefits, if applicable</li>
<li>Training, if applicable</li>
</ul>
<h4>First day of employment</h4>
<p>The employer must also provide the employee with the following information on the first day of employment:</p>
<ul>
<li>Sick pay and procedures</li>
<li>Other paid leave (e.g. maternity or paternity leave)</li>
<li>Notice periods</li>
</ul>
<p>However, the employer can choose to leave this out of the principal statement and include it in a further document or somewhere accessible to the employee, such as a company intranet (where it would form part of the company’s staff handbook of policies).</p>
<h4>Wider or full written statement of particulars</h4>
<p>Employers must provide the following information no later than two months after the employee has started work:</p>
<ul>
<li>Pension details</li>
<li>Details of any applicable collective agreements</li>
<li>Information about any non-compulsory training provided by the employer</li>
<li>The company’s grievance and disciplinary procedures</li>
</ul>
<p>This information can be provided in one document or in instalments over the two-month period.</p>
<h3>Common terms in employment contracts</h3>
<p>Employment contracts set out the rights and responsibilities of both employers and employees. The specific terms may vary between roles and industries, but there are certain key provisions that appear in most contracts. We set these out below.</p>
<h4>Employee handbook and company noticeboard</h4>
<p>Employment terms may refer to additional policies outlined in an employee handbook or posted on a company noticeboard. These policies often include disciplinary procedures, grievance mechanisms and workplace policies.</p>
<h4>Offer letter</h4>
<p>An offer letter is a preliminary document confirming a job offer and basic terms. However, it does not replace a full employment contract.</p>
<h4>Collective agreements</h4>
<p>Some businesses have agreements negotiated with trade unions that set terms for multiple employees. These agreements must be referenced in employment contracts if applicable.</p>
<h4>IP clauses, restrictive covenants and confidentiality clauses</h4>
<p>IP clauses, restrictive covenants and confidentiality clauses ensure that any creations, inventions or innovations developed by an employee during their employment belong to the employer. Restrictive covenants &#8211; such as non-compete, non-solicitation and non-poaching clauses &#8211; prevent employees from unfairly competing after leaving the company. Confidentiality clauses safeguard sensitive business information, trade secrets and client data.</p>
<h4>ACAS role in employment law</h4>
<p>The Advisory, Conciliation and Arbitration Service (ACAS) provides guidance to employers and employees on workplace rights and dispute resolution. ACAS codes of practice are not legally binding but are often referenced in employment tribunals to assess whether employers have acted fairly.</p>
<h4>Implied terms in employment contracts</h4>
<p>Where a contract is silent or imprecise on a matter, there may be ‘implied terms’ that, although not explicitly stated, are legally binding. These terms arise from common law, statutory rights, industry norms or the necessity of making the contract workable, and include duties such as an employer’s obligation to provide a safe working environment. Courts may also recognise these implied terms based on established workplace practices or legal precedent.</p>
<h3>Employment Rights Bill changes</h3>
<p>The UK government has proposed 28 changes under the <a href="https://bills.parliament.uk/bills/3737">Employment Rights Bill 2024</a> aimed at enhancing protections for gig economy workers, improving family-friendly rights, and strengthening protections against workplace discrimination.</p>
<ul>
<li>See also: <a href="https://linnearcms.wpenginepowered.com/resources/employment-law-2024-roundup-key-cases-developments/">Employment law 2024 roundup: key cases and developments</a></li>
<li>See also: <a href="https://linnearcms.wpenginepowered.com/resources/uk-employment-law-overview/">UK employment law: overview</a></li>
<li>See also: <a href="https://linnearcms.wpenginepowered.com/resources/labours-right-to-switch-off-what-we-know-so-far/">Labour’s new Employment Rights Bill</a></li>
</ul>
<p>However, the bill has faced some criticism for being unaffordable and overly ambitious, and the full scope of the bill remains to be seen. Regardless, <a href="https://www.linnearlegal.co.uk/resources/labours-new-employment-rights-bill/">businesses should stay abreast of these changes to remain compliant</a>.</p>
<h3>Ending an employment contract</h3>
<p>All employment contracts should include clear termination provisions. Key considerations include:</p>
<ul>
<li>Notice period requirements</li>
<li>Dismissal procedures (including fair reasons for termination)</li>
<li>Redundancy procedures and compensation</li>
<li>Garden leave and restrictive covenants</li>
</ul>
<h3>What happens if an employer fails to comply?</h3>
<p>UK employment law requires businesses to provide certain contractual terms to employees. Non-compliance can lead to employment tribunal claims against the employer or grievance claims, and compensation amounts can vary from two to four weeks’ pay, capped at a prescribed amount.</p>
<p>Employees entitled to receive a written statement who do not receive one can also make a subject access request to the employer. If the employer does not comply with this request, the employee can escalate to the Information Commissioner’s Office.</p>
<h3>Breach of employment agreement</h3>
<p>A breach of an employment agreement occurs when either the employee or employer breaks the terms of the employment contract. This can include:</p>
<ul>
<li>Not paying wages in time or in full</li>
<li>Not working agreed hours</li>
<li>Changing working conditions without an agreement</li>
<li>Gross misconduct, such as theft or fraud</li>
</ul>
<p>Breaching an employment contract can result in legal claims for damages, employment tribunal proceedings or dismissal. This is why it’s especially important to have everything in writing so it’s clear whether a breach has actually occurred.</p>
<h3>Can an employer change the employment contract?</h3>
<p>The employer can change the terms of an employment contract if one of the following applies:</p>
<ul>
<li>The employee agrees to the change</li>
<li>The contract states that the employer can make certain changes (this is a ‘variation clause’), or</li>
<li>The law is changing, necessitating the change</li>
</ul>
<p>When the employer makes these changes to the contract, this is called a ‘variation of contract’.</p>
<p>It’s always best practice to draft a thorough employment contract that covers all legal obligations and clearly sets out the relationships between worker and employer, as well as expectations.</p>
<h3>Advantages of a comprehensive employment contract</h3>
<p>We generally advise employers to draft a comprehensive employment contract that covers all bases set out in requirements for the principal statement and the wider written statement of particulars. This is because a contract can provide better clarity and legal protection for both employer and employee. What’s more, it mitigates the risk of accidentally creating contradictions that might occur with multiple documents created at different times or by different people.</p>
<h3>Tailoring the employment contract to specific roles</h3>
<p>Contracts should be tailored to reflect the specific requirements of each role. Senior executives may require detailed confidentiality and restrictive covenants, while casual workers may need more flexible terms. Businesses should ensure contracts align with the nature of the job and industry regulations.</p>
<h3>Written vs. verbal contracts</h3>
<p>Information that could be excluded from written statements should be written down instead of left as a verbal agreement. A common misconception is that verbal agreements provide flexibility. In reality, a verbal agreement can lead to uncertainty over the terms of the contract and makes it difficult for any party to prove anything. Further, the default position when a written contract hasn’t been provided is that statutory employment provisions will apply, potentially leading to less flexibility.</p>
<p>As an example, if an employer had only agreed a verbal contract with an employee, but wanted to revise the employee’s hours so they worked overtime for additional compensation, the employer would be limited by statutory provisions – namely the <a href="https://www.legislation.gov.uk/uksi/1998/1833/contents">Working Time Regulations 1998</a> – that would prevent the employer from changing the hours to more than 48-hours per week.</p>
<p>It’s sensible for employers to provide the job offer in writing, as well as information about how the employee will be paid and the standards of behaviour expected of employees (and what might happen if these standards are not met).</p>
<h3>Draft employment contracts with expert legal guidance</h3>
<p>Employee contracts are a crucial component of any business, ensuring legal compliance and setting out clear expectations for both employers and employees. By including key clauses, meeting statutory requirements and avoiding common pitfalls, businesses can create robust employment agreements that protect their interests and foster positive working relationships. Companies should regularly review and update their contracts in line with UK employment law and seek legal advice on how to create bespoke contracts that protect their business</p>
<p>Linnear Legal’s team of lawyers have <a href="https://www.linnearlegal.co.uk/employment/">expertise on employment law</a> matters, from drafting robust contracts to advising on upcoming changes to the law. <a href="https://www.linnearlegal.co.uk/get-in-touch/">Speak to a lawyer today</a> for help with drafting your business’s employment contracts tailored to specific roles.</p>


Employment contracts: what businesses need to include

Learn the essential elements of employee contracts in UK employment law, including legal requirements and best practices.

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