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A guide to: Contract of Employment

Luisa Syed 29 Jul 13:13 3 min read
man signing a contract

You may be a business owner looking to expand and start hiring employees, or you may be a new employee who has started their first job or is changing to a different position. If you are either the former or latter, you will have a contract of employment present - an agreement between employer and employee. If you are wondering how to start or what a contract of employment is, here is a simple guide on why an employment contract is essential and what it should include.

What is a contract of employment?

A contract of employment or employment contract is a set of agreed terms between the employer and employee once the employee accepts the job role. It can be a written or verbal form of contract, but most employers use the former. An employment contract confirms the employee's acceptance of the company and begins when the employee starts to work. There are several different contract types that employers need to make sure they match the job’s criteria, such as Full-time, Part-time, Permanent, Temporary, Zero-hour, Apprenticeship etc.

Why is a contract of employment needed?

The purpose of an employment contract is to inform the employer and employee of the agreed terms and to make sure that both parties adhere to the contract, thus often, a contract needs to be signed. If one party breaks the terms of the contract (written or verbal) without a legitimate reason, it is known as a Breach of contract and may lead to the party being legally dealt with.

What should be included in a contract of employment?

Several things are included in an employment contract, and therefore a contract usually ends up being a few pages long. Employers may have additional sections besides the ones listed below. Still, these are the standard sections that employers should include in an employment contract which is also known as a ‘Principal statement’:

  1. Name of parties
    The full details of employer and employees names and addresses.
  2. Start date of employment
    This is the date when the employee will commence employment.
  3. Employee’s job title and duties
    This section should include the job description as advertised by the employer and the responsibilities that the employee will carry out.
  4. Place of work
    The contract should state the address of the workplace and information about location flexibility.
  5. Hours of Employment
    Exact hours of work that employee has to carry out per week. Employers may also need to specify if the employee will need to work for additional hours.
  6. Probation period
    The probationary period is the period of time at the start of employment when the employer can dismiss an employee under little or no notice if the employee is found to be unsuitable for the role. Typically a probationary period is three-six months long.
  7. Salary and Expenses
    This section should state the employee’s salary per hour before tax and national insurance and the date when employees will be paid.
  8. Deductions
    Any deductions that the employer can make to the employee’s salary. Deductions have to be made lawfully; if not, there will be consequences.
  9. Holidays
    How many days per year of holidays the employee is entitled to, and should also specify bank holidays or public holidays included
  10. Sickness
    This section should explain how and what time employees need to call in to let employers know they are sick, and if they are entitled to sick pay. A doctor’s note may also be required.
  11. Termination of employment
    This section will specify that the employer has the right to terminate the employee’s contract if they believe the terms have been breached.
  12. Pension
    This section should let the employee know if they will be included in the employer’s pension scheme or if there is not a pension scheme for the role.
  13. Notice
    This is the amount of notice period that needs to be given by the employer or employee, and what the consequences could be if notice of period is not given as stated. This section can also state the notice period for termination.

Why should you have an employment contract?

  • It is a security for both parties.
  • It will clarify the terms and conditions that need to be met by both parties.
  • It will allow the employee to know what their rights are and what they are entitled to.
  • It will allow you to create a good working relationship with your employee.

Additional points you should consider when making an employment contract:

  • Make sure that the contract is appropriately written, spell-checked and that the employee’s details are correct
  • It is a contract that represents your company, your terms and conditions so make sure it is properly branded.
  • The same contract should be used for every employee unless there are specific or unique terms prearranged.
  • It should be structured according to government advice.
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