How to easily write a contract of employment (with a free template)
As a small business owner, taking on your first members of staff can be somewhat daunting. One of your first duties is to make sure that you’re abiding by all the legal regulations when writing a contract of employment.
But, with so much to wrap your head around, understanding employment contracts can be a challenge.
If you’re not sure entirely how to write a contract of employment — or you just need some further advice — then this guide, with a free template that you can use, is for you.
What is a contract of employment?
A contract of employment, or an employment agreement, is a mandatory document that allows businesses to hire employees properly. They’re used across a wide variety of companies and industries, allowing employees to understand the expectations they’re supposed to meet within their role.
A contract exists as soon as a potential employee says “yes” to an offer of employment, regardless of whether the offer is a written document or a spoken agreement.
The rights and duties of both the employer and the employee are known as the “terms of contract”. These contractual terms are then split into “express” terms and “implied” terms.
Express terms are agreed upon between you and your employee. All the terms and conditions are spelt out in the contract, either verbally or in writing. This includes:
- How much an employee is paid — Including any overtime or bonuses.
- Holiday pay — Including how many days off the employee is entitled to.
- Working hours — This includes overtime hours (however, there is usually a legal limit on the maximum number of hours an employee can work per week).
- Sick pay — By law, you must pay all employees Statutory Sick Pay if they’re off work for longer than three consecutive days.
- Redundancy pay — If you need to reduce your workforce, dismissed employees are often entitled to redundancy pay. This only applies to employees who have been at the company for over two years, per government policy.
- Notice period — How much notice is needed should you dismiss the employee or they want to move on from the company.
The law states that certain express terms must be put in writing and given to the employee.
Implied terms are those that may not have been set out in writing or orally but form part of the agreement between the employer and employee. As an employer, it is your duty to:
- Maintain mutual trust and confidence — The employer must not act in a way that would damage a relationship with an employee. This includes physical or verbal abuse, sexual harassment, and imposing unfair working conditions.
- Provide a safe workplace — It’s important that the working environment is safe and following all regulations, including COVID-19 guidelines.
- Fair pay — Legally, employees have the right to receive at least the national minimum wage or living wage.
- Reasonable care for physical and mental health — All employers must ensure that employees’ physical and mental health is taken care of during their employment.
What must be written in an employment contract?
When writing an employee contract, you must detail all relevant information, so they are clear on their role and what is expected of them. You must include:
- The employer's name/your business name
- The employee's name, job title and description of the role
- Their start date
- Their wage
- When they will get paid (e.g. weekly or monthly)
- Their hours and days of work
- Details of overtime
- Details of holiday and sick pay
Why do I need to write a contract for my staff?
A contract gives both you and your employee rights, responsibilities and obligations to follow.
As an employer, there’s no legal obligation to provide a written contract for each employee — both full-time and part-time — but you do have a duty to provide a written statement of specified terms within two months of their employment commencing.
Some employers believe that not committing anything in writing allows them more flexibility with how they treat employees and run their businesses.
However, a lack of written contracts causes uncertainty over employee rights, which is something that could cause issues in the future.
The benefits of a written contract
A written contract of employment that dictates the current terms and conditions provides certainty and clarity. It also helps to reduce future disputes as both the employer and the employee are able to identify and refer back to specific terms in their contract.
If you fail to provide a contract for your employee, you may put your business at a disadvantage. If, for example, an employee hasn’t been given a contract with a specific clause about their notice period, they are only legally obliged to give one week's notice when they move on from the company.
How to structure an employment contract
To avoid misunderstandings between yourself and your employee, include specific information about their job title, employment period, pay and benefits and more.
Some certain terms and conditions will be present in almost every contract of employment. These usually include:
- Job information - This should provide key information about the role including job titles, department and department heads as well as more information about the place of work, e.g. where the offices are located.
- Pay and benefits - Include information about annual salary or hourly pay rates, raises and bonuses, as well as any additional benefits or incentives.
- Employment type and periods - It’s important to define whether the employee is working full-time or part-time. Also, include the number of hours they’re expected to work per day, and where it is they’ll be working. Are they working weekends, nights or during the week? Are there flexible working hours?
- Holidays and sick leave - How many days of holiday is your employee entitled to? Does this include bank holidays? Define information about sick leave, unpaid leave and what employees should do following emergencies including family.
- Termination procedure and rights - It’s important to state in the employment contract what rights you have, as the employer, as well as the rights of your employees, when it comes to termination of employment. You must include a notice period length and whether your employee needs to give written notice of termination.
- Disciplinary procedures - Should you discipline or dismiss an employee, legally you are required to follow an established disciplinary and dismissal procedure. These can range from a verbal or written warning to suspension or a recommendation for termination of employment.
- Garden leave policy - Should your business deal with highly sensitive information or you work with clients, garden leave can be used as a protectionist measure for employees who have handed in their notice or had their employment terminated. Essentially, it means instructing the employee to stay away from work during their notice period whilst still remaining on the payroll.
- Other paid leave - If an employee takes time off work, they will be entitled to their normal pay. This includes maternity, paternity and bereavement leave.
Can you make your own contract of employment?
Although you can certainly write up your own employment contract for staff, it might be helpful to have a member of your HR team look over it first. This is just to make sure all the clauses you are setting out are correct and legal as employment law can change very frequently.
How do I write a freelance contract?
Similarly to how you would write a staff contract. A freelancing contract should include everything you expect from your freelancer in terms of work ethic. Make sure to include their pay rate, holiday and sick leave as well as work delivery times.
Is it illegal to not have a contract of employment?
This can be a tricky one, although there is no legal requirement to provide a written contract for any role, it is advised all employees have one. If you're working, you should have an employment contract, whether that be a written contract or a verbal one.
Verbal contracts are fine, but obviously, it can be harder to prove the terms of the agreement if there is no written record of it.
Employment contract template
Each business's employment contract will be different. This is because every company employs a range of people in a variety of roles, with no two businesses being the same.
If you’re wondering what you need to include in your contract or how to write an employment contract, then we’ve already got this covered for you.
Download our free employment contract template that offers all the information you need.
What happens if there is a breach of contract?
If any of the terms of the employment contract are broken — either by the employer or the employee — this is known as a breach of contract.
Employer breaches contract
If an employer doesn’t keep to the terms of the contract and makes changes without the agreement of the employee, the employee may try raising a grievance against you with a tribunal claim.
Some instances of breaches of a contract include:
- Non-payment of wages, travel expenses or holiday pay.
- Not being paid during the notice period if an employee has been dismissed.
- Changes to terms and conditions of the contract without informing the employee.
- Withdrawal of a job offer after the employee has accepted.
- Health and safety issues such as falling at work — Find out how to protect your company with our employer’s liability insurance.
- Sexual harassment.
- Verbal and/or physical abuse.
Employee breaches contract
Similarly, if any employee breaches their contract, the matter should try to be settled informally first. If this doesn’t work, employees may sue for damages or lack of financial income.
An employee still has the right to any wages they have earned before they left the company, plus any pay for untaken statutory holidays.
The most common breaches of a contract by an employee are:
- Quitting without giving, or working, the proper notice period that is set out in their contract.
- Going to work for a competitor when the contract doesn’t allow it.
- Divulging company secrets or intellectual property.
- Gross misconduct, including sexual harassment and physical/verbal abuse.
If a member of staff does try to claim unfair dismissal, it’s important that you have all of your legal expenses in place. You can read about how you can protect your business against legal costs in the UK with our guide to legal expense insurance.
Writing a contract of employment
While understanding the terms and conditions for writing a contract of employment can sometimes feel overwhelming, it’s important that you put in place the proper measures of employment contracts.
Using our contract of employment template, knowing what is considered a breach of contract and how to structure your contract is important for any business.
Get in touch with the Bionic team to discuss your needs or get more information on business insurance today.