People & Leadership

What is a contract of employment?

Wondering what a contract of employment should cover? This guide explains the legal implications, what to include, and the different types of contracts used in the UK.

Published 5 August, 20269 min read Share

A contract of employment is a legally binding agreement between an employer and employee that sets out the terms and conditions of the working relationship, including job responsibilities, salary, working hours, and notice periods.  

In the UK, employers are legally required to provide a written statement of employment particulars within two months of a new employee’s start date. Understanding what they should contain and when they should be used is important for both employees and employers. 

Key takeaways

• A contract of employment is legally binding even if it was never written down — but UK employers must still provide a written statement of employment particulars within two months of the start date, and failing to do so carries legal consequences.
• Statutory rights apply whether or not the contract mentions them — minimum wage, 5.6 weeks’ paid holiday including bank holidays, statutory notice based on length of service, and protection against unfair dismissal can’t be contracted away.
• A thorough contract covers four areas: the basics, pay and leave, termination and conduct, and legal clauses — ambiguity around salary, hours, notice, and restrictive covenants is what tends to cause disputes later.
• Employers can’t change contract terms unilaterally — any change needs the employee’s agreement, and significant changes imposed without it can give grounds for a constructive dismissal claim, so a new contract or formal amendment should follow any promotion, pay change, or shift in responsibilities.
• There are eight common contract types in the UK: permanent, fixed-term, temporary, zero-hours, freelance, agency, casual, and apprenticeship — the right one depends on the nature of the work, and fixed-term and part-time employees hold the same rights as permanent staff, pro rata where relevant.

Here’s what we’ll cover: 

Why are employment contracts important? 

Employment contracts protect both employers and employees by setting clear expectations, preventing misunderstandings, and providing a legal framework for resolving disputes. Without one, both parties are more exposed if the working relationship breaks down. 

By clearly setting out the roles, responsibilities, and expectations of both parties, contracts help communication, prevent misunderstandings, and create a shared understanding of the working relationship. 

They also typically cover intellectual property ownership, confidentiality and non-disclosure obligations, and dispute resolution mechanisms such as arbitration or mediation. 

By establishing standardised terms and conditions, contracts also help ensure fair and consistent treatment, reducing the risk of discriminatory or inconsistent practices across the workforce.

What kinds of situations should an employment contract be requested for?

An employment contract should be provided whenever a new employee joins a business, whenever employment terms change, and whenever temporary or consulting arrangements are put in place. 

If employment terms change, whether through a promotion, salary adjustment, or shift in responsibilities, a new contract or formal amendment should be issued. 

For temporary or consulting arrangements, a written contract should set out the duration, compensation, and any terms specific to the nature of the engagement.

What are the legal implications of a contract of employment in the UK? 

In the UK, a contract of employment is legally binding and must comply with employment law, including statutory rights around minimum wage, paid holidays, notice periods, and protection against unfair dismissal. These rights apply whether or not they are explicitly stated in the contract. 

While a contract doesn’t need to be written down, employers must provide a written statement of employment particulars within two months of the employee’s start date. Failing to do so can result in legal consequences. 

Here are the key legal implications every employer and employee should be aware of: 

Statutory rights 

Minimum wage, paid holidays, and protection against unlawful discrimination must be upheld regardless of what the contract says. Employers must comply with the National Minimum Wage Act and the Working Time Regulations as a baseline. 

Notice periods 

Contracts should specify notice periods, but even where they don’t, employees are entitled to statutory notice based on their length of service. The only exception is in cases of gross misconduct. 

Unfair dismissal 

The contract should set out the grounds and procedures for termination. Dismissing an employee without valid grounds or proper process can lead to claims of unfair dismissal. 

Constructive dismissal 

This occurs when an employee resigns because the employer has seriously breached the implied terms of trust and confidence, even without a formal dismissal taking place. 

Redundancy 

Employers must follow fair and transparent procedures in cases of redundancy, including proper consultation with affected employees, as set out in both the contract and statutory requirements. 

Health and safety 

Contracts should confirm the employer’s obligation to provide a safe working environment and the employee’s corresponding duty to comply with safety rules. 

What kind of information should be specified in a contract of employment?

A contract of employment should include the job title and description, working hours and location, salary and benefits, probationary period, leave entitlements, notice period, confidentiality clauses, and dispute resolution procedures.  

The basics  

Every contract should start with the foundational details that identify the parties involved and define the nature of the role. 

• Parties to the contract: the full names and addresses of both employer and employee. 
• Job title and description: the employee’s role and a clear outline of their duties and responsibilities. 
• Type of employment: whether the role is permanent, part-time, fixed-term, and so on. 
• Start date: when employment began, along with an end date if applicable, plus any opportunities for extension. 

Pay, hours, and leave  

These are the terms employees are most likely to scrutinise and the ones most likely to cause disputes if left ambiguous. 

• Salary and benefits: the agreed salary or hourly wage, payment frequency, and any additional benefits, such as bonuses or health insurance. 
• Work hours and location: standard working hours, any variations, and the regular place of work.
• Probationary period: the duration and terms of any probationary period. Three months is typical for entry-level roles; six months is common for senior positions. 
• Leave and time off: holiday entitlement, sick leave, and maternity/paternity leave. UK employees are entitled to 5.6 weeks’ paid holiday per year, including bank holidays. 

Termination and conduct  

A good contract sets clear expectations for behaviour and makes the process for ending employment transparent for both sides. 

• Termination terms: the notice period required by both parties, grounds for termination, and any severance provisions. 
• Code of conduct: expectations around workplace behaviour, ethics, and adherence to company policies. 
• Restrictive covenants: any post-termination restrictions, such as non-compete or non-solicitation clauses, if applicable. 

Legal and compliance  

These clauses protect the business and ensure both parties understand their legal obligations throughout and beyond the employment relationship. 

• Confidentiality and non-disclosure: clauses requiring the employee to protect sensitive company information. 
• Intellectual property: confirmation that work created during employment is owned by the employer. 
• Dispute resolution: the agreed mechanism for resolving conflicts, such as arbitration or mediation. 
• Health and safety: the employer’s commitment to a safe working environment and the employee’s duty to comply.
• Training and development: any provisions for professional development, including who covers associated costs. 
• Policies and procedures: reference to company policies, either within the contract or as an attachment. 

If in doubt about any of these clauses, it’s worth seeking legal advice before the contract is signed, because getting them right from the outset is far easier than amending them later. 

What are some different types of employment contracts?

The most common types of employment contracts in the UK are permanent, fixed-term, temporary, zero-hours, freelance, agency, casual, and apprenticeship contracts.  

The right type for a particular situation depends on the nature of the work and the terms both parties wish to establish. 

Permanent or open-ended contracts  

This is the most common type of employment contract. It has no fixed end date, and the employment relationship continues until either the employer or the employee gives notice to terminate. These contracts can cover full- or part-time hours, with part-time employees being entitled to the same employment rights and benefits on a pro rata basis as their full-time counterparts. 

Fixed-term contracts 

A fixed-term contract specifies a predetermined end date for the employment relationship. These contracts are often used for temporary or project-based work. Employees on fixed-term contracts have the same rights as permanent employees for the duration of their contract. 

Temporary contracts 

Similar to fixed-term contracts, temporary contracts are designed for short-term employment. They are commonly used for seasonal work or to cover a specific period of increased workload. 

Zero-hours contracts 

These contracts do not guarantee a minimum number of working hours. Instead, the employer offers work as and when needed, and the employee can choose whether to accept the offered hours. These contracts provide flexibility for both parties. 

Freelance or self-employed contracts 

Freelancers or self-employed individuals work on a contract-for-service basis. They are not considered employees and are responsible for their taxes and National Insurance contributions. Freelancers often work for multiple clients and must manage their own accounts and finances. 

Agency contracts 

Individuals working through employment agencies may have agency contracts. In this arrangement, the agency acts as the employer, and the worker is engaged to provide services to a client. Agency workers have specific rights, including access to the same basic employment conditions as permanent employees. 

Casual contracts 

Casual contracts are often used for irregular or sporadic work. Employees on casual contracts are not guaranteed regular work and are typically employed as needed. 

Apprenticeship contracts  

These contracts are designed for individuals undergoing a structured training programme to develop specific skills, e.g., electricians, chefs, mechanics, and IT technicians. These contracts combine on-the-job training with classroom learning and follow a specific framework.

Get employment contracts right from the start 

Employment contracts are critical for establishing a healthy and transparent professional relationship. They provide the rules, expectations, and protection necessary for both employers and employees to navigate the workplace. A well-crafted contract ensures fairness, legal compliance, and a clear understanding of rights and responsibilities.  

Whether starting a new job or undergoing changes in employment terms, a reliable employment contract serves as a crucial guide, fostering a positive and flexible working culture. 

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