All You Need to Know About Employment Contracts (UK Guide 2025)
An employment contract is a legally binding agreement between an employer and an employee that sets out the terms of employment, including pay, duties, working hours, and rights. In the UK, every employee or worker must receive a written statement of key terms on or before their first day of work — whether the agreement is full-time, part-time, or temporary.
Why Employment Contracts Matter
Employment contracts form the foundation of the relationship between employer and employee. They define mutual expectations, protect both parties’ rights, and reduce the risk of disputes.
Without a clear written contract, misunderstandings can arise over pay, working hours, or job responsibilities — leading to costly conflicts or claims. A well-drafted contract ensures transparency, legal compliance, and peace of mind for both employer and employee.
For employers, it is also a vital compliance requirement: under UK law, all employees and workers must be provided with key employment details in writing.
What Is an Employment Contract?
An employment contract is a binding agreement between an employer and an employee or worker that sets out terms and conditions of employment.
It may be written, verbal, or implied — but written contracts are strongly recommended to avoid ambiguity. Even if nothing is signed, a contract still exists once a person accepts an offer and begins work, because employment rights are triggered by the working relationship itself.
Employment contracts can include express terms (clearly stated in writing or spoken) and implied terms (understood by law or custom).
Employees vs Workers vs Self-Employed
The type of contract you need depends on employment status:
Employees have full rights, including redundancy pay and unfair dismissal protection.
Workers have some rights, like holiday pay and the minimum wage, but less protection overall.
Self-employed individuals usually work under service agreements rather than employment contracts.
Understanding the right status is crucial for both compliance and tax purposes.
Types of Employment Contracts
Different contract types reflect how and when work is performed. The main categories are:
1. Permanent or Open-Ended Contracts
These have no fixed end date and provide ongoing employment until either party ends it. They are the most common type and typically include full employee rights.
2. Fixed-Term Contracts
Used when a role is temporary or linked to a project with a set end date. Employees on fixed-term contracts have the same rights as permanent staff and must not be treated less favourably.
3. Part-Time Contracts
Similar to full-time contracts but with reduced hours. Part-time staff must receive equal treatment in pay, holiday, and benefits on a pro-rata basis.
4. Zero-Hours or Casual Contracts
No guaranteed hours; workers are called in as needed. These contracts must still comply with minimum wage and holiday pay laws. Exclusivity clauses are not allowed.
5. Temporary and Agency Contracts
Usually arranged through an agency for short-term roles. The agency is often the legal employer responsible for pay and compliance.
6. Internship or Apprenticeship Agreements
Used for structured training or educational programmes. These must specify duration, pay, and learning expectations.
Each contract type should be clear about duration, pay, and notice terms to prevent confusion and protect both parties.
What Must Be Included in an Employment Contract
Under the Employment Rights Act 1996, every employee and worker employed for at least one month must receive a written statement of particulars on or before their first day of work.
This statement must include key details such as:
Employer and employee names
Job title and description
Start date and, if applicable, continuous employment date
Place of work or flexibility clauses
Salary and payment frequency
Working hours and shift pattern
Holiday entitlement and pay
Notice periods for termination
Probation period details
Pension arrangements and benefits
Sick pay and absence rules
Grievance and disciplinary procedures
Employers can include additional clauses to protect their business, such as:
Confidentiality and non-disclosure obligations
Intellectual property ownership clauses
Restrictive covenants to prevent competition or client poaching
Bonus and commission structures
Remote or hybrid work expectations
Variation clauses allowing reasonable flexibility
Contracts should also reference other company documents — like employee handbooks — where policies are explained in more detail.
Providing and Managing Employment Contracts
Employers must provide the principal written statement by day one of employment. It can be delivered physically or electronically, but it must be easily accessible to the employee.
If any changes are made later (for example, to pay, working hours, or job duties), both parties must agree in writing.
Unilateral changes — where an employer alters terms without consent — may result in breach of contract or even constructive dismissal claims.
For significant changes, consultation with the employee is required, and updated contracts or addendums should be issued promptly.
Changes to employment contracts are sometimes necessary — for example, to adjust pay, working hours, or location. However, there are strict rules:
Consult First: Employers must discuss proposed changes with affected staff.
Gain Written Consent: Any change must be agreed and documented.
Avoid Unilateral Action: Forcing a change without agreement can lead to legal action.
Provide Notice: Give adequate notice of contractual variations.
Issue Updated Terms: Supply a revised statement reflecting the changes.
In cases of disagreement, employees can raise a formal grievance or involve Acas (Advisory, Conciliation and Arbitration Service) to mediate disputes before legal escalation.
Common Contract Issues to Avoid
Many small businesses make the same avoidable errors when drafting or managing contracts. The most common include:
Not issuing contracts or written particulars on time
Using outdated templates that breach current legislation
Overly restrictive non-compete clauses that cannot be enforced
Failing to update contracts after promotions or legal changes
Mixing “employee” and “worker” terms incorrectly
These mistakes can expose employers to tribunal claims and reputational damage. Professional legal or HR advice can prevent costly errors.
Enforcing and Disputing Employment Contracts
If a contract is breached — for example, by unpaid wages or unfair dismissal — employees may bring a claim to an Employment Tribunal or through the civil courts.
Common contract disputes include:
Non-payment of wages or bonuses
Breach of notice terms
Failure to provide contractual benefits
Wrongful dismissal or misuse of restrictive covenants
Employers and employees should always aim to resolve disputes internally first. Acas conciliation is often an effective and free step before tribunal proceedings.
Frequently Asked Questions
Can a verbal contract be legally binding?
Yes, but written contracts are strongly advised to prove agreed terms.
Is a zero-hours contract legal in the UK?
Yes, but workers must still receive minimum wage, holiday pay, and protection against unfair treatment.
Can my employer change my contract without my consent?
No. Changes require consultation and agreement unless there’s a clear flexibility clause.
Do probation periods need to be written into the contract?
Yes, including length, notice period, and rights during probation.
How long should contracts be kept?
Employers should keep employment contracts for at least six years after employment ends.
Conclusion
Employment contracts are the cornerstone of every working relationship. They ensure clarity, compliance, and trust between employers and employees while defining how work is carried out and protected under law.
A well-structured, legally compliant contract helps businesses operate transparently and reduces risk from disputes or claims.