What should be included in a contract of employment?

There are four different terms to be aware of when it comes to employment contracts: express terms, statutory terms, implied terms and incorporated terms. While only express terms, such as pay and working hours, must be documented in writing via a written statement, it’s a good idea to set out all terms that are relevant to the relationship in a written employment contract.

Putting together an employment contract can feel intimidating. What needs to be included to make it legally compliant? What’s important, in order to protect your business interests, to have clarified in writing?

In this guide, we’ll help demystify these notoriously lengthy, often jargon-heavy documents.

What to include in an employment contract

By law, an employment contract must contain the following contractual clauses, known as ‘express terms’:

• Name and address of employer and employee
• Start date
• Date contract will apply from
• Continuous services date
• When the contract is expected to end if temporary or fixed term
• Job title or a brief description of duties
• Place of work
• Requirement to work overseas
• Hours of work
• Pay – how often and when
• Holiday entitlement
• Sickness absence and pay
• Notice period
• Pension arrangements
• Disciplinary and grievance procedures (or explanation on where to find information about these)
• Collective Agreements

It’s also advisable to include clauses on the following issues in contracts:

• Requirement to undertake other duties
• Warranty to be able to work in the UK
• Not allowed to work elsewhere
• Requirement to act in your best interests
• Flexibility
• Compliance with remote working policy
• Rules and procedures
• Monitoring
• Payment in lieu of notice
• Dismissal without notice
• Suspension
• Changes to terms of employment
• Employer property
• Health and safety
• Confidential information
• Intellectual property
• Data Protection
• Third party rights
• Signature

You can also use the employment contract to agree a wide range of other particulars with the employee, such as:

• discretionary bonuses
• compassionate leave
• the right to search

and many more…

Implied terms in employment contracts

Implied terms are the terms which are deemed to be in the contract between employer and employee whether written down or not.

They include the employer’s duty to:

• pay wages and cover the costs involved in carrying out the work
• provide work
• give reasonable notice of termination of employment
• take reasonable care of the health and safety of employees
• provide a suitable working environment (eg a workable temperature, free from harassment and bullying)
• manage employee grievances reasonably
• not act in such way as to destroy or damage working relationship with the employee (known as mutual trust and confidence)
• comply with the relevant employment rights for example right to paid holiday or statutory sick pay – these are the ‘statutory terms’ of the contract

Also implied is the employee’s duty:

• not to disrupt an employer’s business
• not to compete with the employer’s business
• not to steal customers
• not to entice other employees to leave the business
• not to use confidential information
• to do what the employer asks (providing it is lawful and reasonable)
• to be adaptable (within reason)
• to carry out their job with reasonable care and skill
• give notice of termination of employment
• not act in such way as to destroy or damage working relationship with the employee (known as mutual trust and confidence).

What can be left out of an employment contract?

It’s often best not to use your employment contracts to record arrangements which might be susceptible to change over time.

Examples of this are detailed sickness absence procedures, non-contractual discretionary bonus schemes and cycle to work schemes.

If you write these into the contract, there’s an expectation that they will always be provided and cannot be changed without following a fair formal consultation process.

This means that if you wish to change one of the procedures or schemes, you’ll need to consult with your employees before you can do so, which can be time-consuming and present tricky situations if an employee objects to your amendments.

It’s often better to document these arrangements in your policies, as opposed to contracts, and reference these policies by way of ‘incorporated terms’ in your contracts. This way changes can be made with less hassle.

Making changes to employment contracts

If you do need to make minor changes to an employee’s contract, you must give the employee advance notice and put these changes in writing, either by issuing a new contract or by sending a letter setting out the changes.

Substantial amendments, such as changing an employee’s working hours, will always need the person’s agreement. In some cases you may need to give them something in return for agreeing to the change (known as ‘consideration’). This usually means you would implement changes at the same time as offering a promotion or pay increase.

If changes are made, you should provide details of the changes within one month of the change. If you are considering making substantial changes to the contracts of your existing staff we recommend that you discuss the best way of implementing these changes with an HR consultant.