How to Write an Employment Contract (4 Easy Steps)
If you're a business owner, one of the most important things you'll probably need to do is write an employment contract. This post outlines the legal nitty gritty required.
In this post, we break down what makes a strong employment contract, how to write an employment contract, what types are available, and why an employment contract template can save you time and money - without sacrificing on quality.
Let's start.
What is an employment contract?
An employment contract sets out the terms under which your new employee has been employed. Probing more deeply, however, employers are required to provide employees and workers with minimum “written particulars of employment”. This would include things like salary, working hours, holiday entitlement, probationary period, etc.
While employers are legally obliged to provide a written employment contract covering at least the minimum “written particulars of employment”, if an employer fails to do so an oral employment contract would still be binding. However, in the absence of a written employment contract covering at least the minimum “written particulars of employment”, not only would the employer be in breach of certain UK legislation, but it also could make it much harder to manage the employee's expectations and to establish what the terms actually are/were in the case of any dispute. With that in mind, and to mitigate the impact of disputes with employees, employers must equip employees with a written employment contract that defines in clear terms the nature of the relationship.
What happens if your business decides to engage with flexible working arrangements? In this scenario, you will need to consider the most appropriate wording in your employment contract clauses (such as place of work and working hours clauses) to best reflect the flexible working arrangements. In this case it might be sensible for an employer to ensure that the employment contract allows the business to retain a degree of control over the situation by ensuring that the flexible working arrangements remain subject to the needs of the business.
On the employee’s side, even if an employee does not initially have a flexible working arrangement, they have the right to request flexible working, which as an employer you must consider and provide a reasonable response for.
Express terms vs implied terms within employment contracts
When drafting your employment contract or investigating employment contract templates, you’re likely to come across the phrases “express terms” and “implied terms”. What do these mean?
Express terms are the terms expressly set out and included in the contract of employment.
Implied terms, as the name suggests, are not expressly set out in an employment contract but automatically arise as a consequence of the circumstances in which the employment contract is entered into. All employment contracts, however comprehensively drafted, will have implied terms.
Examples of implied terms within employment contracts include:
The duty of mutual trust and confidence
Duty of fidelity (i.e. the employee will complete work and “serve” the employer with good faith and fidelity)
Duty not to disclose confidential information
Contracts with employees vs contracts with independent contractors
Contracts with independent contractors are often referred to as consultancy agreements or freelance agreements, and should only be used when the person providing services is genuinely self-employed - as opposed to being an employee or worker within your business. In contrast, contracts with employees or workers are often referred to as employment contracts.
It’s particularly important for businesses to be certain about the employment status of each new hire, as it will impact employment rights, tax implications (e.g. IR35/off-payroll working rules), and wages.
Types of employment contracts
The type of employment contract you use to engage with someone working with your organisation will come down to the nature of the employment status of the person you’ve hired. Let’s take a look at this in further detail. First up, the employment contract!
Employment contract
There are a number of different scenarios where an employment contract would be used. This includes:
Senior Employee: Usually a longer notice period, higher salary, and more onerous post-termination restrictions.
Junior Employee: Usually a longer probationary period, lower salary, shorter notice period, and less onerous post-termination restrictions.
Director’s Service Agreement or Founder’s Service Agreement: This may include share plan entitlements or equity investments, together with significantly more onerous duties and restrictions in comparison to a non-director employee.
Salaried Partner: A non-equity partner who receives a salary which may or may not be based on a fixed share of the profits. Usually, salaried partners can’t take part in management decisions, they have no voting rights, and they have the status of an employee - among other things.
Other agreements that you may use to engage people who will be working with your business could include:
Consultancy or freelance service agreement
A consultancy agreement is used for self-employed contractors. We’ve covered this in a bit more detail just further up in the blog.
Casual worker agreement
Casual workers may be engaged in a variety of ways and on several different types of contract. This includes zero-hour contracts, short-hour contracts, or guaranteed minimum-hour contracts.
Collective agreements within employment contracts
A collective agreement is a contract that contains agreed terms between an employer or employer’s association, and one or more trade unions. It must be stated in an employment contract (or employment contract template) whether a collective agreement applies to the employment contract and, if so, how that collective agreement may impact the terms of the employment contract .
What to include in an employment contract
Now to the important part: what should you include in an employment contract? It’s important to remember this depends on the seniority of the employee/worker, their status, and the type of contract.
While there is a long list of things to include in an employment contract, from details of the role to obligations of the employer, it can help to start with a well-drafted employment contract template to ensure you’re hitting all points. For the sake of completeness, here is a list of a few essentials you’ll usually need to include in your employment contract template:
Parties’ details
Start date
Job title
Description of the role and the related duties
Termination notice period
Probationary period
Working hours
Work location
Salary
Benefits (e.g. pension, healthcare, company car etc.)
Expenses
Bonus/commission
Holiday/annual leave entitlement
Sick pay
Disciplinary and grievance procedures
Confidentiality
Intellectual property ownership
Post-termination restrictions (e.g. non-solicitation of clients, non-poaching of staff etc.)
Governing law and jurisdiction
However, while the internet is full to the brim with employment contract templates, not all of them hit the mark when it comes to providing your business with the foundations it really needs. At Docue we’re determined to ensure employers and employees alike get started on the best possible foot, which is why our employment contract template is drafted and maintained by expert employment lawyers. Our cutting edge technology combined with our lawyer-made employment contract template selection allows you to create, customise, e-sign, store and manage your employment contracts all in one place with just a few clicks. Our “Ask a lawyer” feature and lawyer-crafted guidelines provide the straight-forward and instanct support you need to be correctly guided through every stage of the drafting process. So next time you need to make that key hire but don’t want the delays or dents in your bank balance that come with traditional legal services, give Docue a try. You will soon come to realise that Docue is an easy-to-use platform which allows you to compliantly cover off your employment contracts and protect your business more quickly, cost-effectively and accurately than ever before.
The employment contract templates on the Docue platform currently include contracts for casual, junior, and senior employees (as well as contractors, directors and founders), and are structured to protect you and your employee/worker. Ready to build a team? Our drafting technology and employment contract templates ensure you do so effectively, quickly and affordably.
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What can be left out of an employment contract?
While working through the list of things you’ll need to include, you’ll be glad to know there are a few clauses you can leave out in certain circumstances. These might include information on things like garden leave or restrictive covenants for particularly junior roles where the risk related to omitting such clauses is quite low.
Making changes to employment contracts
There may come a time when you want to amend an employment contract. While it can be done, there are a number of steps to follow beforehand. Firstly, it’s important to know that unless an employment contract states that the employer is entitled to unilaterally change the terms of the contract, any changes must be agreed between the employer and the employee or worker. Even if the employment contract states that changes can be unilaterally made by the employer, if the changes are substantial it is likely that they would still need to be agreed by the employee too.
In some circumstances, it will need to be done in agreement with a trade union or other employee representatives. Making amendments to employment contracts can be a particularly complex area.
So, what are your options when making changes to an employment contract?
Firstly, you should always try to obtain the employee’s agreement to the changes. Ideally, this can be done through informal discussions but you may need to enter into a more formal consultation to try to reach an agreement. If at the end of the consultation you haven’t reached an agreement, you may need to consider doing what is known as “fire and re-hire”.
This is where you terminate the employment contract and re-employ the individual on new terms. However, employers should be aware of the risks involved. In this scenario, employees may have claims for unfair dismissal. If the employer doesn’t serve notice of termination in accordance with the employment contract, the employee may also have claims for breach of the employment contract.
Before amending an employment contract it’s really important to factor in the risks. You could potentially damage working relations, run the risk of legal claims, increase team stress, or trigger a series of strikes. Take the time to consider whether this really makes sense for the business, and for your employees.
5 types of employment contracts (and related HR documents) your UK business needs
What types of contracts does your business need?
At Docue we’ve created a series of lawyer-made employment contract templates (and related HR document templates), including:
An employment contract for senior employees
A consultancy or freelance service agreement
A director’s service agreement
How to write an employment contract in 4 steps
Writing an employment contract can be be broken down into four parts.
Firstly, title the employment contract - simple stuff!
Secondly, identify the parties involved. This includes you as an employer and your new hire.
Thirdly, list the terms and conditions of the working relationship.
And finally, perhaps most importantly, outline the job responsibilities of the employee, and your obligations as an employer.
While this process can seem fairly simple, it can become a mammoth task trying to create an employment contract that defines the working relationship while protecting employer and employee alike.
Fortunately, Docue has intelligently automated the process of using an employment contract template, allowing you to supercharge your recruitment, hiring and HR processes via the seamless, time-efficient, and cost-effective creation, customisation, e-signature, storage and management of lawyer-made employment contracts.
Get expert employment contract support from Docue’s UK lawyers
As you can tell, building a team has its legal complications. While getting an employment contract right is crucial, it's not as simple as jotting down a few pointers. From figuring out the status of your employee to making sure you address your obligations as an employer, you can very quickly stumble into issues without meaning to do so.
At Docue we not only provide lawyer-made employment contract templates, but we also ensure they are equipped with automated technology that makes the process streamlined and simple. Better yet, if you run into issues, our lawyer-drafted guidance notes are there to guide you through the process.
Final Thoughts
Employment contracts are an important part of growing your team and done right, they can equip your employee with the information needed to thrive. However, the absence of a well-drafted employment contract can unearth a number of issues down the line, which is why it makes commercial sense to make the most of their benefits.
At Docue, we equip growing companies with lawyer-made employment contract templates, so they can evolve their team with peace of mind.
Ready for your next hire? Let us make it easier with our lawyer-written Employment and HR templates.
Docue Legal Team