Employment Contract Guide for UK Small Businesses (2025)
Everything you need to know about creating legally compliant employment contracts in the UK. From statutory requirements to practical clauses that protect your business.
Last updated: February 2025
Legal Requirements for UK Employment Contracts
Under the Employment Rights Act 1996, every employee must receive a written statement of particulars on or before their first day of work. Since April 2020, this requirement extends to workers as well as employees, meaning even casual staff need documentation.
- Written statement of particulars must be provided from day one of employment
- Must include job title, pay, hours, holiday entitlement, and notice periods
- Failure to provide a statement can result in an employment tribunal awarding 2-4 weeks' pay
- The statement can form part of a broader employment contract or stand alone
Key Clauses Every Small Business Should Include
Beyond the statutory minimum, smart employers include protective clauses that safeguard their business interests. These optional but recommended clauses can prevent disputes and protect intellectual property, client relationships, and trade secrets.
- Restrictive covenants (non-compete, non-solicitation) must be reasonable in scope and duration
- Intellectual property assignment clauses ensure work created belongs to the company
- Confidentiality clauses protect sensitive business information beyond employment
- Garden leave clauses give you control during notice periods
Common Mistakes Small Businesses Make
Many small business owners use generic templates downloaded from the internet without adapting them to their specific situation. This often leads to unenforceable clauses or missing statutory requirements that could expose the business to tribunal claims.
- Using contracts that reference outdated legislation or incorrect statutory minimums
- Including overly broad non-compete clauses that a court would refuse to enforce
- Failing to update contracts when employment law changes, such as the 2024 holiday pay reforms
- Not distinguishing between employees and workers, which have different legal rights
Key Takeaways
- Every employee and worker must receive a written statement of employment particulars from day one under UK law.
- Protective clauses like non-competes and IP assignment are optional but strongly recommended for small businesses.
- Generic online templates often contain errors or outdated information — always check against current UK employment legislation.
Frequently Asked Questions
Do I legally need a written employment contract in the UK?
Yes. Since 6 April 2020, all employees and workers must receive a written statement of employment particulars on or before their first day. While a verbal contract is technically valid, failing to provide written terms can result in a tribunal award of 2 to 4 weeks' pay.
Can I use the same contract template for all employees?
You can use a standard template as a base, but each contract should be tailored to the specific role. Job title, salary, hours, and any role-specific clauses such as shift patterns or on-call requirements need to be individualised. One-size-fits-all contracts often miss important details.
What happens if I change an employee's terms without agreement?
Unilaterally changing contract terms is a breach of contract and could give the employee grounds for a constructive dismissal claim. You must consult with the employee, explain the business reasons, and ideally obtain written agreement to any changes.
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Get Started FreeThis is guidance for UK businesses, not legal advice. For complex legal matters, consult a qualified solicitor.
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