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What Managers Need: The Fundamentals Of Employment Contracts

Jun 6, 2008
Getting that initial contract of employment template ready can be a real hassle, and it's tempting to get a professional to draft it up, but even at that stage, it's important to know what you're promising your employee, and to make sure that there are no loopholes that can be exploited by less scrupulous employees. Whether or not you're using a contract of employment template or writing one from scratch, you need to make sure all the bases are covered. For that reason, I've written up this guide to explain what you might need to have on the form, and why:

Firstly, it's important to note that you must give your employees a contract - in fact, by law you're required to give them a statement of terms within 2 months of them joining, but that's the bare minimum, and it's really in your interests to give them something more comprehensive. This is the kind of thing that company employment contracts should contain:


Can't have an employment contract without names - both your employee and the company's. This should also include addresses of both parties

Start Date

This is particularly important to keep a track of, because it can be used to work out when employees gain new benefits, as well as keeping a track as to when they should be up for review.

Job Title and Description

Put down the same job title that you advertised with, and then any duties that you feel they may be undertaking. It might be worth covering your back here and including something to the effect that the duties are down to your discretion and are open to change. If not, they could theoretically refuse to undertake anything else - and have the law on their side, so be sure to leave some space to manoeuvre in your company employment contracts.

Place of Work

This keeps a legal note of the office location in the employment contract, but can also extend to allow occasional working from home and of course for potential office moves in the future.

Hours of Work

This is where you stipulate the number of hours the employee needs to keep, and the manner in which they can keep them (e.g: do they have a flexitime setup where they need to complete a certain number of hours within any given week?) The employee can also agree to additional hours, as long as the employer does not demand more than 48 hours a week, which would be illegal. The employee can voluntarily opt out of the law, should they wish.

Probationary Period

This is a nice one to include in the contract, because sometimes things just don't work out - either they employee isn't what the employer was looking for or the job isn't right. This trial time typically has a shorter notice period and employment can be terminated by either side at any time. This is typically a number of months or weeks, but can be extended by the employer if they put such a clause into the UK employment contract.


This is what your employee expects to see on their wage slip at the end of each month and an area fundamental to the employment contract. It's worth noting that the figure will be before any tax deductions or national insurance is taken into account.


If the employer wishes, they can schedule regular assessments here - every 6-12 months would be a sensible figure, allowing you to monitor their development easily.


This is the point in the employment contract where you outline all circumstances in which you are permitted to make deductions from the salary. This is a really good opportunity to cover your back and outline the kind of behaviour you expect from your employee.


Covering what your employees can expect by way of expenses is very important to ensure they are aware of how much they will be covered by you for heir work. Make sure that you avoid errors and fraud by insisting that each claim is backed up with proof of payment.

Holiday Time

This obviously outlines the period of holiday that an employee is allowed, with the minimum being 24 days including bank holidays. It is important that you inform employees whether bank holidays are included or excluded from the figure. There are certain other aspects you need to consider when writing this part of the UK contract of employment:

1) Whether employees should be allowed to take busy periods off (most retail industries will want to avoid this)
2) Holidays rolling over into the next employment year (though it's important to note that this is not allowed for statutory holiday, only time off over the minimum.)
3) Any restrictions on holiday time to employees who have already served notice


Absence through sickness can be a major drain on businesses, especially small ones, so it's important to be vigilant with this section. You will need to outline what time the worker needs to contact the employer telling them they will not be in, when a doctor's certificate is required and whether the employee will receive statutory or contractual sick pay.


Here you need to outline the pension scheme the employee can expect, whether it be a company one, a stakeholder one or if there isn't one provided by the company. You will need to change any contract of employment template to reflect the policy of your company.


This is an important one - the notice period. Outlining the period of worktime that needs to be served before an employee's contract can be terminated, this is also the place to outline a list of actions that constitute gross misconduct, and can allow an employee to be dismissed without notice. If you don't define this clearly in your company employment contracts you can be left distinctly short-handed of a sudden!

Restrictive Covenants

An intimidating sounding title for an intimidating piece of the document! This is where you get to protect confidential and commercially sensitive information belonging to the employer. You can also prevent an employee from setting up a competing business while in your employment, and for a set period of time from when they leave the employer. This can also cover preventing the employee from encouraging others to leave for a competing business. You will want to close this section with the threat of legal action, should these promises be broken.

Disciplinary Policy and Grievance Procedure

This is the part of the employment contract where you outline the company's disciplinary policy. You state the standards and conduct you expect, and the consequences of failure to meet these standards.

The grievance procedure outlines the course of action available to employees should they have a complaint they cannot resolve through regular communication with their line manager.


This states the employee's contractual retirement age. It's important that this complies with the relatively recent 2006 age discrimination legislation, or you could be fighting legal action.


If you have a template of employment contracts, rather than tailoring each one to each employee this section is essential. It basically states that each section of the document stands independently of the rest and thus if one does not apply to any employee it does not effect the others.

Prior Agreements

This is an important one to keep in, as it expresses that the employment contract contains all the terms that should apply, and any other agreements - written or verbal - do not count.


This is required to confirm that the UK contract of employment is held under the jurisdiction of English courts.

Particulars of Employment

Since the Employment Rights Act of 1996, all UK employment contracts are required to have the main terms outlined on a separate schedule, so that both the employee and the employer can easily refer to them, to refresh their memories of the main points.

Make sure you have all these fundamentals of employment contracts covered, and that each one matches the expectations of the employee and you should have no problem!
About the Author
Iain Mackintosh is the managing director of Simply-Docs. The firm provides over 1100 legal documents covering all aspects of business from holiday entitlement to contract of employment templates.
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