A contract of employment is the cornerstone of any working relationship, defining the terms and expectations between an employer and an employee. Under UK law, it not only outlines the duties and rights of both parties but also serves as a crucial legal document that can help avoid misunderstandings, disputes, and litigation. From the very first day of employment, having a clearly drafted and legally compliant contract is not just best practice; it’s a legal obligation.
Clear and enforceable contracts support smooth operations, mitigate legal risks, and foster a positive work environment. They set the tone for mutual trust and confidence, which are vital to long-term employee engagement and organisational success. However, the complexity of employment law means that contracts must be handled with care to ensure compliance and effectiveness.
Kingfisher Professional Services are specialists in this area, offering expert support to businesses in drafting, reviewing, and enforcing employment contracts that are robust, fair, and fully compliant with current legislation.
Legal Basics of Employment Contracts
What is a Contract of Employment?
A contract of employment is a legally binding agreement between an employer and an employee that governs their working relationship. It outlines the rights, responsibilities, and obligations of both parties. Importantly, under the Employment Rights Act 1996, the contract may be made verbally or in writing; both forms are equally binding in the eyes of the law.
A key distinction must be made between the contract of employment and the written statement of employment particulars. While the contract encompasses the overall agreement between employer and employee, the written statement is a specific document required by law that outlines certain essential terms. Despite being just one part of the contract, the written statement carries legal weight and must not be overlooked. The contract can also include terms implied by law, custom and practice, or incorporated from external documents like staff handbooks or collective agreements. This layered structure means that not all terms are found in a single document, making comprehensive drafting all the more critical.
Legal Requirement for a Written Statement
Following changes introduced by the Good Work Plan in April 2020, it is now a statutory requirement for employers to provide a written statement of employment particulars from the very first day of employment. This marked a significant shift in employment law, designed to ensure greater transparency and fairness in the employment relationship from the outset.
The written statement must include critical information such as job title, employment start date, salary, hours of work, probationary period, notice requirements, benefits, training entitlements, and the disciplinary and grievance procedures. Employers who fail to comply may face claims at an employment tribunal and potential compensation awards to the employee. The statement provides both parties with clarity and serves as a valuable reference in the event of disputes, helping to reduce the likelihood of conflict and ensure a mutual understanding of the terms of employment.
Core Terms in Employment Contracts
Express, Implied and Incorporated Terms
Employment contracts are comprised of express, implied, and incorporated terms. Express terms are those specifically agreed upon between the parties, either in writing or orally. These typically include job title, salary, hours of work, and holiday entitlement. They form the core of the agreement and are crucial for setting clear expectations.
Implied terms, while not written down, are no less important. These are obligations that arise by operation of law or through custom and practice. Examples include the employer’s duty to provide a safe working environment and the employee’s duty to act in good faith. The concept of mutual trust and confidence is a fundamental implied term that underpins the working relationship, requiring both parties to treat each other fairly and respectfully.
Incorporated terms are those drawn from external documents or agreements, such as collective bargaining agreements or an employee handbook. These terms are legally binding if referenced correctly and form part of the overall contract. However, they must be clear and not contradict express terms to avoid legal uncertainty.
Common Contract Clauses
The core clauses in an employment contract are foundational to defining the employment relationship. Each clause should be precisely worded to avoid ambiguity and reflect the reality of the working arrangement. For instance, a job title and accompanying description should clearly outline the employee’s responsibilities to ensure both compliance and effective performance management.
The place and hours of work must be accurately stated, with any expectations for remote work, shift patterns, or travel made explicit. Salary details should include the amount, payment intervals, and any applicable bonuses. Where benefits such as private healthcare or pension contributions are offered, they should be detailed clearly to avoid future disputes.
The probationary period clause allows employers to evaluate a new hire’s suitability. It should specify the duration, review process, and any implications for termination rights. Notice periods are also vital; they determine how much notice each party must give to end the employment relationship and whether payment in lieu or garden leave is applicable. Holiday and sick pay provisions must comply with statutory requirements, and any enhancements should be documented.
Specialist Clauses Employers Should Consider
Restrictive Covenants
Restrictive covenants are critical in protecting a business’s confidential information, client relationships, and workforce. These clauses come into play particularly when an employee leaves the organisation. Non-compete clauses restrict the employee from joining or establishing a competing business for a defined period. Non-solicitation clauses prevent the employee from poaching clients, customers, or colleagues. Confidentiality agreements ensure that sensitive business information is not disclosed during or after employment.
The enforceability of these clauses depends heavily on their reasonableness. Courts assess whether the restrictions go no further than necessary to protect legitimate business interests. An overly broad non-compete clause, for example, that spans too wide a geographic area or lasts too long, is likely to be unenforceable. Therefore, these clauses must be carefully drafted, proportionate, and tailored to the specific risks and seniority of the employee’s role.
Flexibility and Variation Clauses
Flexibility clauses provide employers with the ability to adapt working arrangements in response to business needs. For example, they may allow changes in duties, location, or working hours. Variation clauses outline how changes to the terms of the contract can be made, often requiring consultation or mutual agreement.
These clauses are useful but must be applied fairly. Any change imposed without proper process can amount to a breach of contract, possibly resulting in constructive dismissal. For these reasons, employers should not rely solely on flexibility clauses to enforce major changes. Instead, they should approach variations with transparency, consultation, and legal advice to ensure changes are lawful and reasonable.
Types of Employment Contracts
Employment contracts are not one-size-fits-all. The type of contract an employee is engaged on significantly affects their rights, entitlements, and the employer’s obligations. A permanent or full-time contract offers ongoing employment with full employment rights, such as redundancy pay and protection against unfair dismissal after two years’ service.
Part-time contracts operate on the same legal footing but with entitlements prorated. Fixed-term contracts, often used for projects or temporary cover, end on a specified date or when a task is completed. Employees on these contracts are still entitled to the same benefits as permanent staff and may also be entitled to redundancy pay depending on length of service.
Zero-hours and casual contracts offer the most flexibility but also pose the greatest risk if not managed properly. These arrangements should be used cautiously, ensuring that workers receive all statutory entitlements, including holiday pay, rest breaks, and minimum wage. Misclassifying workers can result in significant liabilities and legal disputes.
Probation, Notice and Termination
Probation Periods
The probationary period is an important feature in many employment contracts. Typically lasting between three and six months, it provides an opportunity for both the employer and the employee to assess compatibility. During this period, performance is reviewed, and either party may have shorter notice requirements. While it may suggest a less secure phase of employment, statutory rights such as protection from discrimination still apply.
Employers should document the length of the probation period, the review process, and any possible extension. Clear communication and fair evaluation during this time are vital for legal compliance and employee morale.
Notice Periods
Notice periods must be clear and consistent with statutory minimums. Under the Employment Rights Act 1996, employees are entitled to one week’s notice after one month of service, increasing incrementally with tenure. However, contracts often specify longer periods to protect both parties.
Employers can opt for payment instead of notice (PILON), where the employee is paid for the notice period without working. Alternatively, they may place the employee on garden leave, requiring them to stay away from the workplace while remaining on the payroll. These options protect the business while managing the transition smoothly.
TUPE and Changing Contract Terms
The Transfer of Undertakings (Protection of Employment) Regulations, commonly known as TUPE, safeguard employees’ rights when a business or part of a business is transferred to a new employer. TUPE ensures that the terms and conditions of employment are preserved, and employees transfer automatically to the new employer.
Changing contractual terms post-transfer is highly regulated. Any variation that is solely or principally related to the transfer is likely to be invalid unless it meets specific legal tests. Employers must demonstrate that any changes are due to an economic, technical, or organisational reason involving changes in the workforce. Legal advice is essential in these situations to avoid unlawful variations and potential claims for unfair dismissal or breach of contract.
How Kingfisher Professional Services Can Help with Contracts of Employment
We offer comprehensive support for employment contract compliance. Our services include:
- Expert Contract Support: Tailored advice on drafting, reviewing, and updating contracts of employment. Kingfisher’s consultants ensure every agreement aligns with the latest legal requirements and reflects operational needs effectively.
- 24/7 Compliance Assistance: Immediate, round-the-clock support for complex contract issues, from enforcing restrictive covenants to resolving disputes or implementing variations. Our expertise helps employers stay on the right side of employment law.
- Bespoke Employment Law & HR Solutions: Customised consultancy services that cover every contractual aspect, from probation and notice clauses to TUPE transitions and disciplinary procedures. Kingfisher ensures your employment contracts are not only compliant but also practical and enforceable.
With Kingfisher’s guidance, businesses can maintain clarity and fairness in employment relationships, reduce legal risks, and foster a confident, compliant workplace environment.
Conclusion
A legally sound, fair, and well-drafted contract of employment is vital for both employer and employee. It provides clarity, ensures compliance with employment law, and helps manage workplace risks effectively. Contracts also help to foster a professional and respectful culture, setting the tone for a productive working relationship.
Misinterpretation, poor drafting, or non-compliance can lead to costly disputes and reputational damage. To avoid these pitfalls and ensure your contracts reflect best practice, contact Kingfisher Professional Services for expert HR and legal support.