Employment Contracts: A Complete UK Guide

An employment contract is the legal agreement that governs the relationship between an employer and an employee. It exists from the moment a job offer is accepted — even if nothing has been signed and the terms were agreed verbally — because a contract is formed by agreement, not just by a document. A contract is made up of express terms (those expressly agreed, in writing or orally) and implied terms (those the law reads in, such as the duty of mutual trust and confidence). Separately, every employee has a statutory right to a written statement of the main employment terms on or before their first day. Getting the contract right protects both sides: it sets clear expectations, reduces disputes, and underpins everything from pay and hours to confidentiality and exit. This guide explains, for employers and employees, what an employment contract is, what it must contain, the different types, how it can be changed, and the 2025 reforms reshaping it.

What an employment contract is

An employment contract is simply the agreement under which a person works for an employer in return for pay. Crucially, it does not have to be a signed document — a contract is formed as soon as an offer of employment is accepted, whether in writing, by email, or verbally. Many of its terms may never be written down at all, yet are still binding. This is one of the most misunderstood points in employment law: an employee with no signed contract is not “without a contract” — they have one, made up of whatever was agreed plus the terms the law implies. A well-drafted written contract simply records the express terms clearly, which is why having one matters — not because it creates the contract, but because it removes doubt about what was agreed.

The written statement of main terms

Under section 1 of the Employment Rights Act 1996, every employee and worker has the right to a written statement of the main terms of employment. Since 6 April 2020 this has been a “day-one” right: for anyone starting on or after that date the principal statement must be provided on or before the first day of work, rather than within the two months previously allowed (GOV.UK).

Separately from the contract itself, every employee (and worker) has a statutory right to a written statement of the main terms of employment, which must be given on or before their first day of work. This day-one right covers the core particulars, including: the names of employer and employee; the start date; pay and when it is paid; hours of work (including any variable hours); holiday entitlement; the job title or description; the place of work; notice periods; probationary terms; and details of other benefits, sick pay, pensions, and any training requirements. The written statement is not the whole contract, but it must accurately reflect the agreed terms. Failing to provide it can lead to a tribunal award, and getting it right at the outset is the foundation of a clear employment relationship.

Express and implied terms

Every contract is made up of two kinds of term. Express terms are those the parties have specifically agreed — in the contract document, the written statement, an offer letter, a staff handbook (where incorporated), or even orally. Implied terms are not written down but are read into the contract by law, either because they are obvious, because of custom and practice, or because a statute or the courts require them. Both are equally binding. A frequent source of dispute is the relationship between the two — for example, whether a policy in a handbook is a binding express term or merely guidance, or whether something is overridden by an implied term. Understanding which terms are express, which are implied, and how they interact is central to knowing what the contract actually requires of each side.

Key implied terms

Some implied terms appear in virtually every employment contract and matter a great deal in practice:

These implied terms operate even where the written contract says nothing about them, and a serious breach — particularly of trust and confidence — can have significant legal consequences.

Common employment contract clauses

A well-drafted written contract typically sets out a familiar set of express terms:

The detail of these clauses — especially pay, hours, confidentiality and any restrictive covenants — is where contracts most often need careful drafting and, sometimes, negotiation.

Types of employment contract

Not all employment contracts are the same. The main types are:

The type of contract affects which rights apply and how the relationship can be ended, so choosing — and labelling — the right type matters for both sides.

Employee, worker or self-employed?

The label in the contract is not decisive. In Autoclenz Ltd v Belcher [2011] UKSC 41, and again in Uber BV v Aslam [2021] UKSC 5 (judgment 19 February 2021), the Supreme Court confirmed that tribunals look at the reality of the working relationship, not just the written terms, when deciding whether someone is an employee, a worker or genuinely self-employed.

One of the most important and litigated questions in employment law is a person’s status, because it determines which rights they have. There are three broad categories: an employee (the fullest set of rights, including unfair dismissal and redundancy); a worker (a middle category with rights such as the minimum wage, paid holiday and protection from discrimination, but not unfair dismissal); and a genuinely self-employed contractor (running their own business, with few employment rights). Status is determined by the reality of the relationship — control, personal service, mutuality of obligation and integration into the business — not by the label in the contract. Getting status wrong is costly: a person labelled self-employed may in fact be a worker or employee, with all the rights and liabilities that brings. Both businesses and individuals should look at the substance of the arrangement, not just what the paperwork calls it.

Changing an employment contract

An employment contract can generally only be changed by agreement between the parties — an employer cannot simply impose new terms. To make a change, the employer should consult, explain the business reason, and seek the employee’s consent; the change can then be recorded in writing. Some contracts contain a flexibility or variation clause allowing limited changes, but these are interpreted narrowly. Where an employer imposes a significant change without agreement — cutting pay, changing hours or duties — the employee may be able to claim breach of contract, resign and claim constructive dismissal, or work “under protest” and challenge the change. The controversial practice of “fire and rehire” — dismissing employees and re-engaging them on new terms to force through changes — is now tightly constrained and the subject of reform. Changing terms properly, through genuine consultation and agreement, is far safer than imposing them.

Restrictive covenants

Many contracts, especially for senior or client-facing roles, include restrictive covenants — post-termination restrictions designed to protect the employer’s legitimate business interests after the employee leaves. Common types include non-compete (not working for a competitor for a period), non-solicitation (not approaching the employer’s clients), non-dealing (not dealing with clients even if they approach), and non-poaching (not recruiting former colleagues). To be enforceable, a covenant must go no further than reasonably necessary to protect a legitimate interest — an overly wide or long restriction will be void as a restraint of trade. Restrictive covenants are a specialist drafting area in their own right, and both employers imposing them and employees bound by them should understand how far they really reach. They are an important but frequently over-drafted part of the modern employment contract.

Probation periods

Many employment contracts include a probationary period — commonly three to six months — during which the employer assesses whether the employee is suitable for the role. A probation period is purely contractual: it does not by itself change the employee’s statutory rights, although it often comes with a shorter notice period and a lighter performance-management process while it runs. Importantly, probation has never removed day-one protections such as discrimination and automatically unfair dismissal, and from January 2027, when the unfair dismissal qualifying period falls to six months, employees will gain ordinary unfair dismissal protection at a point many will still be within a longer probation. The contract should state the length of probation, any extension provision, the notice that applies during it, and what happens at the end. For employers, probation is a useful tool, but it is not a licence to dismiss without any process — particularly as the law tightens.

The contract and the staff handbook

Most employers operate a staff handbook alongside the contract, setting out policies on matters such as discipline, grievances, absence, equality and conduct. A key question is whether handbook provisions are contractual (binding terms the employer must follow and cannot easily change) or non-contractual (guidance the employer can update). The usual and sensible approach is to keep most policies non-contractual, so they can be updated without needing every employee’s agreement, while making clear which limited provisions are contractual. The contract should state how the handbook relates to it. Getting this relationship right avoids two opposite problems: accidentally turning a policy into a binding term the employer is then stuck with, or relying on a policy that turns out not to bind the employee. A well-drafted contract and handbook work together, with the boundary between them clearly defined.

Breach of an employment contract

A breach of contract occurs when either side fails to honour a term. Employers breach the contract by, for example, not paying agreed wages, unilaterally cutting pay or changing terms, or seriously damaging trust and confidence. Employees breach it by, for example, failing to give proper notice, breaching confidentiality, or competing in breach of a valid covenant. The remedies depend on who breaches and how seriously: a serious (repudiatory) breach by the employer may entitle the employee to resign and claim constructive dismissal; a breach causing financial loss can give rise to a damages claim, which for employment can be brought in the tribunal (within limits) or the courts. Wrongful dismissal — dismissing without proper notice — is itself a breach of contract. Understanding what amounts to a breach, and the remedy for it, is central to enforcing the contract on either side, and is an area where early advice can prevent a small issue becoming a costly one.

An employment contract checklist

Whether you are issuing or reviewing a contract, check that it:

• Includes the written statement particulars — pay, hours, holiday, notice, job, place of work and the rest.
• States probation terms clearly, including notice during it.
• Defines the relationship with the handbook and which provisions are contractual.
• Sets pay, hours and benefits accurately and unambiguously.
• Contains sensible, enforceable restrictive covenants where genuinely needed.
• Reflects the correct status — employee, worker or self-employed — in substance, not just label.
• Is up to date with the 2025 reforms on zero-hours, day-one rights and fire-and-rehire.

A clear, accurate, up-to-date contract is the single best protection against later disputes for both employer and employee.

Employment contracts and the 2025 reforms

The Employment Rights Act 2025 received Royal Assent on 18 December 2025 and is being introduced in phases. Day-one protection from ordinary unfair dismissal was not adopted; instead a six-month qualifying period is expected to apply from 2027. From April 2026, statutory sick pay and paternity leave become day-one rights and a new Fair Work Agency begins operating.

Employment contracts are directly affected by the wave of reform under the Employment Rights Act 2025. Key changes in prospect include: tighter rules on zero-hours and low-hours contracts, with rights to be offered guaranteed hours that reflect hours regularly worked, and to reasonable notice of shifts; stronger constraints on “fire and rehire”; and the expansion of various day-one rights, including the reduction of the unfair dismissal qualifying period to six months from January 2027. Much of the detail is being delivered through secondary legislation over 2026 and beyond, so the precise rules continue to firm up. The clear direction is towards greater security and predictability for workers, which means employers should review their contract templates and practices, and individuals should be aware that their protections are expanding. Anyone drafting or relying on an employment contract now should check the current position, because the framework is changing.

Job offers, conditions and starting work

The contract usually begins with a job offer, and how the offer is made matters. An unconditional offer, once accepted, forms a binding contract immediately. A conditional offer — for example, subject to satisfactory references, a right-to-work check, or a medical or DBS check — only becomes binding once the conditions are met, and the offer can be withdrawn if they are not. Employers are required to carry out right-to-work checks before employment begins, and getting this wrong carries serious penalties, so it is a step that cannot be skipped. References are commonly sought, though an employer giving one owes a duty to be accurate and fair. For employees, it is worth understanding whether an offer is conditional and what the conditions are before resigning from a current role. Handling the offer stage properly — clear terms, clear conditions, and the necessary checks — sets the employment relationship off on a sound legal footing and avoids disputes about whether and on what terms a contract came into existence.

Worked example

A new employee starts work having accepted a verbal offer; nothing is signed for several weeks. The employee assumes they have “no contract” — but in fact a binding contract formed when they accepted the offer, made up of what was agreed (pay, role, start date) plus the terms the law implies. The employer should have given a written statement of main terms on or before day one; failing to do so is a breach that can lead to a tribunal award. When a dispute later arises over notice, the answer turns on what was agreed and, in the absence of an express term, the statutory minimum notice that is implied. The example shows two things: a contract exists from acceptance, not signature, and the written statement and clear express terms are what prevent costly arguments about what was actually agreed.

What we see in practice

In our advisory work, the disputes that reach us rarely turn on a missing clause — they turn on a contract that no longer matches how the role is actually worked. The most common pattern we see is a written statement issued on day one and then never revisited as duties, hours or seniority change, so by the time a disagreement arises the document and the reality have drifted apart. We also see employers rely on a job title or a “self-employed” label to decide status, when in practice it is the day-to-day working arrangements that determine a person’s rights. A short annual review of each contract against what the employee is genuinely doing prevents most of these problems before they become claims.

Common mistakes to avoid

• Employers: no written statement. It must be given on or before day one, and failure can be penalised.
• Employers: imposing changes. Contracts can generally only be varied by agreement.
• Both: mislabelling status. “Self-employed” on paper does not make someone self-employed in law.
• Employers: over-wide restrictive covenants. If they go further than necessary, they are unenforceable.
• Employees: assuming no document means no contract. A contract exists from acceptance of the offer.
• Both: ignoring implied terms. Trust and confidence and other implied terms bind even when unwritten.

London employers and employees: a quick note

The contract rules are the same across Great Britain, but London’s labour market — with its mix of senior, professional, agency, gig and flexible roles — makes some issues especially live. Employment status disputes are common where freelance and platform arrangements blur the line between worker and self-employed, and restrictive covenants matter more in competitive, client-driven London sectors. The 2025 reforms on zero-hours and flexible working will also have a significant effect in a city with a large flexible workforce. For London employers and employees alike, the priorities are clear, accurate written terms, correct treatment of status, and keeping contract templates up to date as the law changes.

How Hayhills can help

Drafting and reviewing employment contracts is a commercial and employment matter, not a reserved legal activity, so Hayhills can help you directly. For employers, we draft and review contracts, written statements, handbooks and restrictive covenants, and help you manage contract changes and keep templates compliant with the 2025 reforms. For employees, we help you understand a contract you are offered or bound by — pay, notice, covenants and status — and your rights if terms are changed. Where a dispute reaches the employment tribunal, which is a regulated activity, we work alongside and introduce a regulated litigator. Explore our employment advisory service or speak to Hayhills today.

This article is for general information only and does not constitute legal or accountancy advice. Hayhills Limited, trading as Hayhills Legal Advisory, provides non-reserved legal advisory services. Always check current requirements at GOV.UK.

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