Explore the must-have elements of an employment contract for UK businesses in 2025. This guide breaks down the latest legal requirements and best practices to help you draft clear, compliant contracts that protect your business.
What is an employment contract?
An employment contract is a contractual relationship between employer and employee outlining the terms and conditions of employment, such as salary, working hours etc, and becomes effective when an employee accepts the job offer.
Why do employment contracts matter?
Employment contracts are often dismissed as routine paperwork or a ‘box ticking’ exercise. However, these important documents serve an essential purpose by clearly outlining expectations and responsibilities of both the employer and employee, helping employers avoid miscommunication, workplace disputes and costly legal issues, they;
- Set clear expectations for both employer and employee to help prevent any misunderstandings with regards to duties, salary, working hours etc.
- Protect the organisation by providing a reference point in the event of disagreements, reducing the risk of disputes.
- Comply with employment laws – employers in the UK have a legal duty to outline key terms and conditions of employment.
- Support dispute resolution by acting as a reference point to fairly resolve disagreements or claims.
- Set clear procedures for issues such as dismissal, disciplinary and grievance processes.
What should an employment contract include?
It is a legal requirement to include the following information;
- Employee name and address, job title and brief job description.
- Employer name and full address of place of work.
- Date of commencement, and any previous continuous employment if applicable.
- Job title or description of work.
- Place of work.
- Rate of pay and details of how and when payment will be made.
- Details of any other benefits such as bonuses, pension contributions and health insurance.
- Hours of work including reference to Working Time Regulations if applicable.
- Probationary period to assess suitability and expectations.
- Holiday entitlement including bank holidays.
- Sickness absence procedures to provide a fair and consistent way of managing absence.
- Entitlement to sick pay.
- Details of any other paid leave.
- Details of pension entitlement.
- Details of any requirement to work outside of the UK for more than one month.
- Grievance and disciplinary procedures to ensure a fair and consistent approach for both parties and to protect the employer against potentially costly legal issues.
- Notice periods which must be given by the employer and employee to terminate the contract.
- Reference to important company policies.
- Details of training provided, including whether it is compulsory.
There are also several other provisions, which, although not legally required, will give the employer greater protection, such as restrictive covenants and confidentiality provisions. These need to be carefully drafted to ensure that they can be enforced.
Care should be taken with the drafting of an employment contract, as once signed it becomes it is very difficult to change without the agreement of the employee. The responsibility for drafting employment contracts typically lies within the HR team. However, if your business doesn’t have an internal HR department or more complex legal clauses are required, it is recommended to seek support from an external employment law specialist.
EML can create bespoke contracts, policies, procedures and handbooks. If your documentation requires updating, contact us on 01942 727200 or email enquiries@employeemanagement.co.uk to see how we can support you.