Why are Employment Contracts so Important?

You’ve found the perfect candidate, congratulations! The next step is to prepare the employment contract to ensure you avoid any future misunderstandings or disagreements  over terms and conditions of employment, which could lead to employment tribunals!

An employment contract is a legally binding document that outlines the duties and expectations of an employee and employer, whilst clarifying the conditions, rights, and responsibilities of the employee during the term of employment. A contract of employment replaces prior verbal agreements between both employer and employee, both parties must sign a written contract for the document to be legally enforceable.

By law, an employment contract must contain the following... 

  • Name and address of employer and employee
  • The date of commencement of employment
  • Continuous services date
  • When the contract is expected to end if temporary or fixed term
  • Job title and a brief description of duties
  • Location of work
  • Hours of work
  • Pay – frequency and pay date
  • Holiday entitlement
  • Sickness and absence policy
  • Notice period
  • Pension arrangements
  • Disciplinary and grievance procedures
  • Collective Agreements
  • Training requirements
  • Other paid leave (The good work plan, march 2020, now a requirement

Risks of not having an employment contract?

In the UK, it is a legal requirement for all employers to issue a written statement of employment terms and conditions by the end of an employees first day of employment. A verbal contract will automatically come into existence when a person accepts a job, however a written contract provides businesses with the ability to protect themselves and reduce the risk of disputes or claims being pursued against them.

Without a contractual document in place, businesses will run the risk of facing difficulties and complications if a claim or breakdown in a relationship was to occur within the work place. In addition, if these documents aren’t provided or fulfilled, employers could face penalties or employment tribunals which can result in business being penalised and employees awarded two to four weeks of pay, which will be capped at £450 a week.

A clear and detailed contract of employment that outlines any expectations and standards from employees can aid in safeguarding your business.  Employers have control over the terms and conditions which can reduce the risks of any disputes or claims being brought against a business.


It is highly recommended that businesses regularly review and update employment contracts to remain up-to-date and protected.

If you need help with contracts of employment or any other HR-related issue, contact us today at [email protected], we will be happy to help!