What to Include in an Employment Contract (and What’s Not Required)

Employment contracts are one of the first HR documents a growing business needs. But what actually needs to go in one?

If you’re hiring your first employee, it can be tempting to download a huge employment contract template and assume that every clause is legally required.

It isn’t.

UK employment law requires employers to provide employees and workers with a written statement of employment particulars, containing specific information about their employment. However, a well-written employment contract will usually go further than the minimum legal requirements and include additional terms that protect both the employer and employee.

So, what should you include?

And just as importantly, what don’t you actually need?

What is an employment contract?

An employment contract is the agreement between an employer and an employee setting out the terms and conditions of their working relationship.

It does not necessarily have to be a single document.

A contract can include written terms in an employment contract, offer letter, handbook or other documents, as well as terms that are agreed verbally or implied by law or through established workplace practices.

However, employees and workers have a legal right to receive a written statement of employment particulars.

The principal statement must be provided on or before the first day of employment. Some additional information can be provided separately, but must generally be provided within two months.

For most small businesses, the simplest approach is to put the key terms into a single, well-structured employment contract rather than making employees search through several different documents.

What must be included in an employment contract?

The written statement of employment particulars must contain a number of specific details.

A good employment contract should therefore clearly cover the following.

1. Employer and employee details

Start with the basics.

The contract should identify:

• The employer’s legal name

• The employee’s name

• The employer’s address

• The employee’s start date

• The date continuous employment began, where this differs from the start date

Getting the legal employer’s name right is particularly important for small businesses that use a trading name.

If the business trades as one name but the employing entity is a limited company, the contract should normally identify the correct legal entity as the employer.

2. Job title and duties

The contract should state the employee’s job title or provide a brief description of their work.

You can also refer to a separate job description.

For example:

You are employed as Marketing Manager. Your duties and responsibilities are set out in the accompanying job description.

It can also be sensible to include wording allowing the employee to undertake other reasonable duties that are consistent with their role and the needs of the business.

This gives a degree of flexibility without suggesting that the employer can require the employee to do absolutely anything.

3. Start date and continuous employment

The contract should clearly state when employment starts.

Where an employee has previous service that counts towards their period of continuous employment, that should also be recorded.

This becomes particularly important because various employment rights depend on length of service.

With changes to employment rights continuing to develop, having an accurate record of the employee’s start date is increasingly important for employers.

4. Salary and payment arrangements

The contract should clearly state:

• Salary or rate of pay

• How often the employee is paid

• When they are normally paid

• Any commission, bonus or other contractual payments

• How variable pay is calculated, where relevant

For example:

Your salary will be £40,000 per annum, payable monthly in arrears by bank transfer on or around the 25th of each month.

Be careful with bonuses.

If a bonus is genuinely discretionary, the contract should make that clear. If the employer is promising a guaranteed payment, it should be treated as a contractual entitlement.

5. Working hours and working days

The contract should explain the employee’s normal working hours and days.

It should also explain how those hours or days may vary if the role involves variable working arrangements.

For example:

Your normal working hours are 9.00am to 5.30pm, Monday to Friday, with a one-hour unpaid lunch break.

If the business operates shifts, variable hours, weekend working, overtime or on-call arrangements, these should be explained clearly.

The written statement requirements also cover how working hours or days may change and certain information about Sunday, night work and overtime where relevant.

6. Place of work

The contract should state where the employee normally works.

This could be:

• A specific office

• The employee’s home

• Multiple locations

• A hybrid arrangement

• A combination of workplace and remote working

If the employee may be required to work at different locations, explain this.

For example:

Your normal place of work is [address]. You may also be required to work from other locations reasonably required for the performance of your role.

If the employee is expected to work abroad for more than one month, additional information must be provided, including the expected period abroad, currency of pay, additional benefits or payments and arrangements for returning to the UK.

7. Holiday entitlement

The contract should clearly state the employee’s holiday entitlement and whether bank or public holidays are included.

For example:

You are entitled to 28 days’ paid holiday in each holiday year, inclusive of bank and public holidays.

It is important that the wording makes it possible to understand how much holiday the employee is entitled to, including what happens to accrued holiday when employment ends.

You may also want to include your holiday year and rules around requesting and carrying over annual leave.

8. Sick pay and sickness absence

The contract should provide information about sick pay and the arrangements employees need to follow when they are absent due to sickness.

This could include:

• How the employee should notify the business

• Who they should contact

• When they need to make contact

• Evidence requirements

• Company sick pay, if offered

• Statutory Sick Pay arrangements

The employer can either include this information directly in the contract or explain where the employee can access it.

9. Other paid leave

Employees should also receive information about other paid leave arrangements.

This can include information about statutory family-related leave and other paid leave provided by the employer.

Again, the information does not necessarily have to be written in full in the contract if the contract clearly tells the employee where they can access the relevant information.

For a small business, it is often cleaner to include a simple statement referring employees to the relevant policies in the employee handbook.

10. Notice periods

The contract should state how much notice the employer and employee are required to give to terminate employment.

For example:

After successful completion of your probationary period, you are required to give one month’s written notice to terminate your employment. The Company will provide one month’s written notice or the statutory minimum notice period, whichever is greater.

The exact wording should reflect the arrangements the employer actually intends to operate.

11. Probationary period

If the employee will have a probationary period, the contract should state:

• How long the probationary period lasts

• Any conditions that apply

• What happens at the end of probation

For example:

Your appointment is subject to a six-month probationary period. During this period, your performance, conduct, attendance and suitability for the role will be reviewed.

A probationary period is not legally required.

It is a contractual arrangement used by many employers to provide a defined period for assessing a new employee.

That distinction is important.

You do not need to have a probationary period simply because you are hiring someone.

However, if you do use one, put the terms clearly in writing.

12. Benefits

The contract should identify contractual benefits the employee is entitled to receive.

These could include:

• Private medical insurance

• Company car

• Car allowance

• Life assurance

• Additional holiday

• Commission

• Other contractual benefits

It can also identify non-contractual benefits that the employer may provide but can change or withdraw.

This distinction matters.

If something is contractual, changing it may require agreement with the employee. If it is genuinely discretionary or non-contractual, the employer may have more flexibility.

The written statement requirements specifically require information about contractual and non-contractual benefits.

13. Pension arrangements

The contract should provide information about the employer’s pension arrangements.

You do not necessarily need to reproduce the entire pension scheme rules in the employment contract.

Instead, you can explain the relevant arrangements and tell the employee where they can obtain further information.

14. Training

The written statement should explain any training that the employee is required to complete, including training that the employer does not pay for.

It can also provide information about other training offered by the employer.

This is particularly relevant where employees need specific qualifications, licences or certifications to perform their roles.

15. Disciplinary and grievance procedures

Employers must provide information about their disciplinary and grievance procedures.

These do not necessarily have to be reproduced in full in the employment contract.

You can refer employees to separate disciplinary and grievance procedures and explain where they can access them. Some of this wider written statement information can be provided within two months rather than necessarily forming part of the principal statement on day one.

For most SMEs, keeping the detailed procedures separate is preferable.

It means you can maintain your HR procedures without making the employment contract unnecessarily long.

What additional clauses should you consider?

Once you’ve covered the required information, there are a number of additional clauses that can make an employment contract more useful.

These aren’t necessarily required by law, but may be appropriate depending on the business and role.

Confidentiality

A confidentiality clause can protect commercially sensitive information such as:

• Customer information

• Pricing

• Business plans

• Financial information

• Trade secrets

• Internal processes

For many businesses, this is a sensible addition to an employment contract.

Intellectual property

If employees create intellectual property as part of their work, consider including appropriate intellectual property provisions.

This can be particularly important for technology companies, agencies, creative businesses and businesses where employees create content, software, designs or other intellectual property.

Company property

You may want to explain what happens to company equipment and property when employment ends.

This could include:

• Laptops

• Phones

• Security passes

• Keys

• Company vehicles

• Documents

• Access cards

Expenses

The contract can explain how legitimate business expenses are handled and refer employees to the company’s expenses policy.

Remote and hybrid working

If the employee will work remotely or on a hybrid basis, the contract should reflect the agreed arrangement.

It can also refer to a separate homeworking or hybrid working policy for more detailed practical arrangements.

Restrictive covenants

Some businesses use post-termination restrictions covering areas such as:

• Confidentiality

• Non-solicitation of customers

• Non-dealing with customers

• Non-poaching of employees

• Restrictions on working for competitors

These clauses need to be drafted carefully and should be appropriate to the role and business.

More restrictions are not necessarily better.

A huge list of restrictions that is difficult to justify can create more problems than it solves.

What doesn’t have to be in an employment contract?

This is where employers often overcomplicate things.

You don’t need a 30-page contract

There is no legal requirement for an employment contract to be a certain length.

A contract should contain the necessary information and any additional terms that are genuinely relevant.

A clear 10-page contract can be much more useful than a 40-page document full of unnecessary legal wording.

You don’t need every HR policy in the contract

You do not need to reproduce your entire:

• Disciplinary procedure

• Grievance procedure

• Sickness absence policy

• Holiday policy

• Flexible working policy

• Equality policy

• Social media policy

inside the employment contract.

Where appropriate, the contract can refer employees to separate policies and explain where they can be found.

You don’t need a probationary period

Probation is optional.

If you use one, make sure the contract explains how long it lasts and what conditions apply.

You don’t need a job description as part of the contract

A job description can sit alongside the contract.

The contract can refer to the employee’s job description rather than reproducing it.

This can make it easier to update responsibilities as the business changes.

You don’t need a restrictive covenant

Most small businesses do not need an enormous collection of post-termination restrictions.

Whether you need them depends on the role, the business and the legitimate interests you are trying to protect.

You don’t need every possible scenario covered

Trying to write a clause for absolutely everything that could happen during employment usually makes a contract harder to understand.

Focus on the important terms and use appropriate policies for the operational detail.

Employment contract vs written statement: what’s the difference?

This is one of the most important things for a small business to understand.

A written statement of employment particulars is the information the law requires an employer to provide.

An employment contract is broader.

The written statement can form part of the employment contract, but the contract can also contain additional contractual terms, such as confidentiality, intellectual property and other provisions.

In practice, many employers simply combine the two into one employment contract.

That’s often the easiest approach.

When should an employee receive their contract?

The principal written statement must be provided on or before the employee’s first day of employment.

Some additional information can be provided separately, but the wider written statement generally needs to be provided within two months.

Don’t wait until an employee has been working for several weeks before giving them their contract.

Ideally, the employee should receive the contract before their start date so that they have time to read and understand the terms.

What happens if you don’t provide a written statement?

The employment relationship still exists even if the employer has failed to provide a written statement.

However, employees and workers have a legal right to receive the required written statement, and failing to provide it can create unnecessary disputes about what was agreed.

For a growing business, a written contract is therefore much more than an administrative document.

It creates clarity.

Both sides should understand what has been agreed from the beginning.

A practical employment contract checklist for small businesses

Before issuing an employment contract, check that you have covered:

• Employer and employee details

• Start date and continuous employment date

• Job title and duties

• Salary and payment arrangements

• Working hours and working days

• Place of work

• Holiday entitlement

• Sick pay and sickness procedures

• Other paid leave

• Notice periods

• Probationary period, if applicable

• Contractual and non-contractual benefits

• Pension arrangements

• Mandatory training

• Disciplinary and grievance procedures

• Working abroad arrangements, where relevant

• Confidentiality

• Intellectual property, where relevant

• Company property

• Expenses

• Any appropriate restrictive covenants

The exact contents will depend on the business and the role.

The bottom line

An employment contract doesn’t need to be complicated.

The aim is to make the employment relationship clear from the beginning.

For most small businesses, a good contract should do three things:

Meet the legal requirements.

Clearly explain what the employee can expect from the business and what the business expects from them.

Protect the business where additional contractual terms are genuinely needed.

The biggest mistake is often not having too little in the contract.

It’s having too much.

A contract full of unnecessary clauses, complicated wording and policies that could sit elsewhere isn’t automatically a better contract.

For a small business, the best employment contract is usually one that is clear, proportionate and actually reflects how the business operates.

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