Before a business owner decides to expand their business and start recruiting people to form a team, they will need to know about employment contracts. Similarly, people looking to become workers and employees for firms should know what they can and should expect to receive from an employer.
That’s why we’ve created this guide on employment contracts in the UK, so you can start to see what’s expected of both businesses and their employees – so you will be covered whether you are joining the workforce or helping someone else to join.
What is a Contract of Employment in the UK?
A contract of employment, or an employment contract, is a legally binding agreement that outlines the conditions of a person’s employment. It may or may not be in writing, but it exists because the worker or employee has agreed to work for the employer, and the employer has agreed to pay the worker or employee in return.
An employer must give both workers and employees a written statement when they start working, covering certain terms and conditions of employment when they start work. It’s known as a “written statement of employment particulars”. This isn’t an employment contract, but it should cover the main terms of an employment contract and serves a similar purpose.
The written statement is split into two parts:
The main document, also known as a “principal statement”
A wider written statement
The Principal Statement
The principal statement should at the very least include:
The employee’s or worker’s name
The name of the employer
The date the employee or worker started work
The amount of pay and how often the employee or worker will be paid (weekly or monthly, for example)
The days and hours of work, and whether or not these vary (this should include whether the person will be expected to work nights, overtime, or on Sundays)
Holiday entitlement, including how many days off they are entitled to and what their holiday pay will be, if any
The title of the job
Where the employee or worker will be working, and whether they might have to relocate
If the employee or worker will work in different places, where these will be, and what the employer’s address is
How long a job is expected to last, and what the end date is if it’s a fixed-term contract)
How long any probationary period is and what its conditions are
Any other benefits (such as childcare vouchers, provided lunch, etc.)
Obligatory training, and whether or not this is paid for by the employer
For employees, the principal statement must also include the date that a previous job started, if it counts towards a period of continuous employment.
On the first day of employment, the employer must also provide the employee or worker with information about:
Sick pay and procedures around this
Other paid leave (such as maternity leave and paternity leave)
Notice periods, both in terms of dismissal and quitting
Employers can choose whether they want to include this information in the principal statement or provide it in a separate document. If it’s provided in a separate document, that separate document must be provided in a way that means employees and workers have reasonable access. For example, an employer may choose to upload the information on the business’ intranet.
There are also specific terms that must be included if an employee or worker will be working abroad for longer than a month:
How long they will be abroad for
What currency they will be paid in
What additional pay or benefits they will get
Terms relating to their return to the UK
The Wider Written Statement
The wider written statement that must be provided by an employer has to be given within 2 months of the start of an employee’s or worker’s employment. It has to contain:
Information on pensions and pension schemes
Collective agreements (agreements made with employees’ representatives, such as trade unions or staff associations)
Any other right to non-compulsory training provided by the employer
Disciplinary and grievance procedures
Employers must tell their employees or workers about any changes made to the written statement within 1 month of making the change. There are also specific rules for agencies on documents that they need to provide to agency workers.
Accepting a Contract
As soon as someone accepts a job offer, they will be considered to have a contract with their employer. Workers, employees, and employers must then keep to this contract until it ends, either by the person giving notice or being dismissed or until the terms are changed.
As all terms of an employment contract are agreed upon as soon as a person accepts a job offer, this also means that all terms are legally binding from this moment. This means that employers must still pay and grant holidays even before official documents are signed.
Is It Illegal to Work Without a Contract of Employment?
By law, simply being employed by someone means that there is an employment contract in place. There is no legal requirement for a worker or an employee to have a physical, written copy. However, most experts would recommend that employers provide one anyway, as this ensures the terms of employment are kept clear and straightforward. It also helps protect the business in the event of legal trouble.
If a person has agreed to do some work for someone else, such as painting their house, this is different to an employment contract. Instead, it would be a “contract to provide services”. This is a separate contract, used for appointing people who are self-employed to carry out services for another party. The relationship between the self-employed person and the person who hired them is not that of a worker or an employee and employer.
Types of Employment Contracts
There are several types of employment contracts available in the UK:
The most common employment contract is the full-time employment contract. This is usually a permanent position, with either an annual salary or hourly wages. Alongside a set salary or wages, permanent employees can also expect to receive:
Paid holiday days
Parental leave allowances
Statutory Sick Pay (SSP)
Employee benefits will differ depending on the company, and there is no minimum number of hours that a person must work to be considered a full-time employee. Most full-time roles will be 35+ hours per week, though this is at the employer’s discretion.
Normally, the only real difference between a part-time contract and a full-time contract will be how many hours a person has contracted. A part-time employee’s contract should contain how many hours they are expected to work per week.
Part-time contracts are also often permanent and should offer a salary or hourly wages to suit the number of hours a person has worked, alongside benefits and perks.
Also known as “temporary employment”, this means that a person is contracted to work for a certain number of months. For example, this may be the time it takes to cover someone else’s maternity leave. In a case like this, a person may expect to receive a 12-month contract.
Fixed-term and temporary employees should expect to receive the same benefits as permanent employees, but certain things like holiday entitlement will depend on the contract length. It’s also possible for contracts to be extended, or for employees to be offered permanent positions if they have impressed their employer.
In a zero-hours contract, an employer asks a worker or an employee to work only when they are needed. The employer doesn’t have to provide a set amount of hours and workers and employees are not required to work when the employer wants them to.
People working on zero-hours contracts receive similar entitlements and benefits to those working on permanent contracts. Employers must also pay them at least the National Minimum Wage, and cannot prevent employees on a zero-hours contract from looking for extra work elsewhere. By law, people on these contracts can ignore a clause in their employment contract if it bans them from looking for work or from accepting work for another employer.
A casual contract might also be called a casual agreement or variable agreement. Under the terms of these contracts, an employer isn’t obligated to offer a person work and the individual isn’t obliged to accept the work when it is offered. Often, the term will be used interchangeably with zero hours contracts, as the two are extremely similar and there is no set definition of what constitutes either, or that sets them apart.
Contracts for agency workers are agreed upon and managed by the individual’s recruitment agency. Usually, these will be temporary contracts, with the length of each contract depending on the employer.
The person’s agency is expected to look after their rights, while the employer pays for their National Insurance contributions and Statutory Sick Pay. By law, an agency worker should receive the same rights as permanent employees after 12 weeks of employment at a business.
Freelancers or Contractors
Contracts for freelancers and contractors can differ greatly, depending on the business and on the contract offered. For example, a person may be presented with a contract with a specific start and end date, or they may simply be contracted until a specific project is complete.
Freelancers and contractors are often self-employed, meaning that they will have to handle their taxes and cover their own National Insurance contributions. Being employed under this type of contract also means that the person will not receive the same rights or benefits as those who are permanently employed.
Terms of an Employment Contract
Employment contracts are usually made up of 2 types of contractual terms. These are “express” terms and “implied” terms:
Express terms of an employment contract are the terms that are explicitly agreed between an employer and a worker or an employee. Many of them can even be covered in principal statements, including:
How much an employee or worker should be paid, including overtime and bonus pay
The hours of work, including overtime hours
Holiday pay, and how much time off an employee or worker is entitled to
How much time must be given in terms of notice periods
These may or may not be written in one document, and it’s also possible that they may not be written down at all.
Express terms can also be found in:
An office manual or staff handbook
Anything an employee has been asked to sign since starting work for a company
Any letters sent out by an employer to a worker or an employee before they started work
Instructions or announcements made by employers on a notice board at the company
The job advertisement itself
Employment contracts also contain general, or “implied” terms that apply to workers or employees and their employers. Examples of these include:
Both employers and workers or employees have a duty of trust to each other; for example, if a worker or employee lied about being sick to get time off this would break the implied contractual term of trust
Both employers and workers or employees having a duty of care towards each other and towards other colleagues, meaning that employers should provide a safe working environment and workers or employees should operate in that environment safely (including using equipment safely)
Workers and employees having a duty to obey any reasonable instruction given to them by an employer. There is no set legal definition of “reasonable”, but to give an example, it wouldn’t be considered reasonable to tell you to break the law
Terms Implied by Custom and Practice
These are unwritten, implied terms that are also unofficial practices which have been accepted as the norm within a place of work. You can only call these implied terms when there are no express terms already covering the issue. For instance, if workers or employees tend to stay later and push their hours up to 35 a week when they’re only contracted to do 30, it cannot be said that they have the right to work 35 by custom and practice.
Changing an Employment Contract
Ordinarily, both an employer and a worker or an employee will have to agree before any changes can be made to an employment contract. However, employees and workers can insist on a change if they have a legal right to what they are asking for.
Employers must get their workers’ or employees’ agreement before they make changes to their contracts. This means:
Consulting or negotiating with them or their representatives (such as a trade union or staff association)
Explaining the reasons for the changes
Listening to alternative ideas from employees or workers
Employers may also wish to have discussions with their teams about future plans. This may mean talking about an older employee’s thoughts on retirement and their options for staying on as they feel suits them best, such as through changes to their role, their hours, or their working pattern.
Employees will need to explain to their employers why they want certain changes to be made to their contracts. They can insist on changes if it would be covered by a statutory right, such as not working on a Sunday.
What Happens if an Employment Contract is Broken?
An employment contract can be broken if either an employer or a worker or employee doesn’t follow one or more of the terms laid out in it. This is known as a “breach of contract”. An example of a breach of contract would be an employer dismissing an employee without giving them the amount of notice they’re entitled to under their contract.
If an employer breaks a contract, workers or employees can first try to sort out the problem informally. If this doesn’t work, they may be able to try raising a grievance against their employer.
What Happens to an Employment Contract if a Job Offer is Withdrawn?
This will all depend on the nature of the job offer, and whether it was subject to any conditions.
If a job offer is made subject to certain conditions, like having good references or passing a test, then there will be nothing the person can do if they do not meet these conditions. This is because there was only the conditional offer – there was no contract of employment.
If a job offer is made unconditional, or a person has met the conditions and accepted the job offer but this offer has then been withdrawn, this is a breach of contract. This is because a contract of employment is in place as soon as an unconditional job offer has been made and accepted. A person can claim compensation for breach of contract in an employment tribunal or county court.
Does Your Expanding Business Need New Premises?
If you’re taking the next step forward with your business and recruiting a team, you may be considering getting bigger premises to fit everyone comfortably. Contact us if this is what you’ve been thinking; we’ll be glad to show you around any one or more of our stunning office spaces in London and the surrounding areas. You’ll then have the opportunity to choose the one which suits your business best.
All of our spaces are available to rent on flexible, permanent and semi-permanent tenancy agreements as well, so you can always change your location as your business grows. Take a look at the locations we have available today and find the one that you know will be ideal for you, your work, and your growing team of employees.