What Is an Employment Contract?
An employment contract is the legal agreement between employer and employee. UK law requires employers to provide a written statement of key employment particulars from day one.
Key Takeaways
- UK law requires employers to provide a written statement of employment particulars on or before the employee's first day.
- The contract governs pay, hours, holiday, notice periods, and other key terms.
- Implied terms — rights that exist by law — apply even if not written in the contract.
- Restrictive covenants must be carefully drafted to be enforceable.
The legal requirement for a written statement
Under the Employment Rights Act 1996 (as amended), UK employers must provide all employees and workers with a written statement of employment particulars on or before their first day of work. This is not optional — failure to provide one is a breach of statutory duty and an employee can make a claim to an employment tribunal. The written statement must include: the names of employer and employee, the date employment started, pay rate and pay period, working hours, holiday entitlement (the statutory minimum is 5.6 weeks per year including bank holidays), the notice period required from each party, job title, and place of work. Additional particulars, such as sick pay terms and pension arrangements, must be provided within two months of the start date.
Terms implied by law
Even where a written contract is silent on a matter, certain terms are implied into every employment contract by statute or common law. The National Minimum Wage applies regardless of what the contract says. Statutory sick pay (SSP) applies even if the contract does not mention sick pay. The implied duty of mutual trust and confidence means both employer and employee are legally obliged not to behave in a way that destroys the working relationship. Employees have the right to a safe working environment under health and safety legislation. Understanding that these implied terms exist is important for SME employers: you cannot contract out of statutory rights, and failing to meet them exposes your business to employment tribunal claims.
Key optional clauses for SMEs
Beyond the statutory minimum, a well-drafted employment contract for an SME will typically include: a probationary period clause (typically three to six months), during which shorter notice periods apply; a confidentiality clause protecting business-sensitive information; an IP assignment clause ensuring any IP created by the employee in the course of their role belongs to the employer; a garden leave clause allowing the employer to require the employee to stay away from work during the notice period; and a social media policy by reference. These clauses can only be included in the contract — they cannot be imposed unilaterally after employment begins without the employee's agreement.
Restrictive covenants
Many SME employment contracts include post-termination restrictive covenants — clauses that restrict what an employee can do after they leave, such as non-compete clauses (preventing them from joining a competitor for a defined period) or non-solicitation clauses (preventing them from approaching your customers or colleagues). Under English law, restrictive covenants are only enforceable if they protect a legitimate business interest and go no further than is reasonably necessary to do so. An overly broad clause — for example, a two-year worldwide non-compete for a junior employee — is likely to be unenforceable. Covenants must be drafted by a solicitor with care, tailored to the specific role, and reviewed regularly as the employee's seniority changes.