The employment contract
The moment an applicant unconditionally accepts your offer of a job, a contract of employment comes into existence. The terms of the contract can be oral, written, implied or a mixture of all three. This guide explains what a contract of employment is and implied terms of an employment contract.
Even if you do not issue a written contract, you are under a legal duty to provide all employees who will be employed with you for one month or more with a written statement of main employment particulars within two months of the start of their employment with you. If you have an employee who is going to work abroad for more than a month within two months of starting work, you must give them their written statement before they leave - see terms and conditions for workers in other EU countries.
The written statement is not itself the contract but it can provide evidence of the terms and conditions of employment between you and the employee if there is a dispute later on. This guide outlines what is involved when putting together an employee's written statement and the principal statement.
This guide lays out your legal obligations when issuing a contract of employment or a written statement.
What a contract of employment is
The terms of a contract of employment may be oral, written, implied or a mixture of all three.
Where to find terms of a contract of employment
The terms of a contract of employment can be found in a variety of places, such as:
- the original job advertisement
- written correspondence, eg letters and emails, between you and the employee
- the principal statement
- the written statement
- other written agreements
- oral agreements
- your company policies
- an employee/company handbook
- legislation and case law
Terms through custom and practice
Certain terms of employment may become established or implied into the contract of employment by custom and practice. They may, for example, be regularly adopted within a trade or industry in which the employee works. In the absence of any express or written terms of employment, this is often the only way that an employee can establish their entitlement to important contractual rights. For a term to be implied by custom and practice it must be:
- reasonable - fair and not arbitrary or capricious
- certain - clear to all and not capable of being interpreted in different ways by different people
- notorious - well known to all to whom it relates and should have been in existence for a considerably longer period of time
Terms which could be viewed as implied by custom and practice could include the provision of transport to work, rest breaks, finishing times, commissions, entitlements to overtime payments etc, where these terms are not clearly expressed elsewhere. An oral contract is as binding as a written one, though its terms may be more difficult to prove.
If you want to include provisions specific to the individual, you can state these either orally or in writing. However, stating them in writing may prevent disagreements in the future.
If you issue a written contract, it should reflect those terms and conditions that are currently in place on the date of issue, unless you have agreed on changes. If you have agreed to changes, you should include a term in the written contract stating that it replaces all previous discussions/correspondence in relation to terms of employment.
If you do not have any kind of written contract of employment with an employee, you must - at the very least - issue them with a written statement.
If you have some kind of written contract of employment with an employee, you do not need to issue a written statement as well - but only as long as the contract contains all the items required in a written statement.
The written statement
The written statement is not a contract in itself but is that part of the employment contract that must be provided in writing - and in the case of a dispute - you can use it as evidence of an employee's terms and conditions.
Who is entitled to receive a written statement?
All employees - ie individuals working under a contract of service - are entitled to receive a written statement if their employment is going to last for one month or more.
Individuals who are not employees - eg independent contractors, freelancers, casual workers and some agency workers - are not entitled to a written statement.
When to issue a new employee's written statement
You must give all the required particulars within two months of the date when the employee's employment begins.
If - during the first two months - an employee leaves the UK to work abroad for more than one month, you must give them a written statement before they leave.
Presenting a written statement
The written statement can consist of one or more documents and must set out certain employment particulars. You have to put some of these particulars in a single document, known as the principal statement.
You can set out the remaining particulars in either this document or other documents - see putting together an employee's written statement.
If the written statement is made up of more than one document, you do not have to give the employee all the documents at the same time. This allows you to put certain particulars in documents such as the employee handbook, which the employee can access and refer to when they want.
You can also download our template for a written statement of employment (PDF, 84K) which you can then print off and complete in your own time.
The principal statement
You can set out an employee's written statement in one or more documents.
What employers must include in the principal statement
However, either that document or one of those documents - known as the principal statement - must contain all the information listed below as a minimum:
- The legal name of the employer company - it is a good idea also to include the trading name, if different.
- The legal name of the employee.
- The date the current employment began.
- Any earlier date upon which employment with a previous employer began which is treated as 'continuous' with the current employment.
- The employee's pay, or how it is calculated, and the intervals at which it will be paid - eg weekly or monthly.
- The employee's hours of work.
- Entitlement to holidays - including public holidays - and holiday pay. The information must be accurate enough to allow precise calculation of accrued entitlement.
- The job title or a brief description of the work.
- The address of the employee's place of work. If they will be working in more than one place then you should indicate this along with the employer's address.
For information on what else you must include in a written statement, see putting together an employee's written statement.
You can also download our template for a written statement of employment (PDF, 239K) which you can then print off and complete in your own time.
Putting together an employee's written statement
You can set out an employee's written statement in one or more documents.
Either that document or one of those documents must contain - at the very least - certain information and is known as the principal statement.
In addition to the information that you must put in the principal statement, employers must also give the employee information under the following headings.
Sickness, injury and sick pay
Include terms and conditions relating to sickness or injury including any sick pay provisions.
Alternatively, you can refer to another document containing this information - eg the staff/company handbook - which is accessible to the employee.
Period of employment
Include details of where the employment is not intended to be permanent, the period for which it is expected to continue, or if it is a fixed-term contract, the date when it is to end.
Include the length of notice required from both parties.
Rather than stating specific terms, you can refer to the relevant legislation - see how to issue the correct periods of notice.
Include details of any collective agreements with trade unions that directly affect the terms and conditions of employment including, where the employer is not a party, the persons by whom they were made.
Include any terms relating to pensions and pension schemes. All employers must provide eligible workers with a qualifying workplace pension, known as automatic enrolment. Know your legal obligations on pensions.
Dismissal, disciplinary and grievance procedures
Include some details in the written statement itself. These are:
- the name or job title of the person the employee should apply to in order to resolve a grievance, and how they should make this application
- the name or job title of the person the employee should apply to if they're dissatisfied with any disciplinary decision or decision to dismiss them, and how this application should be made
Some other details that must be included can be either set out in the written statement itself or referred to in another document that the employee can access easily, such as a staff/company handbook. These are:
- the disciplinary rules that you have
- the disciplinary procedures that you have
- the steps that follow an application to resolve a grievance and/or if the employee is dissatisfied with a disciplinary or dismissal decision
Employment outside the UK
Include details of any terms relating to employment outside the UK for more than a month.
If a new employee will normally work in the UK but you need them to work outside the UK for more than a month at a time, the written statement you give them must include the following details:
- the currency in which they will be paid
- the period they will be working outside the UK
- terms relating to their return to the UK
- any additional pay or benefits provided by reason of being required to work outside the UK
Whether the written statement is made up of one or more than one document, you must give it to the employee within two months of the start of their employment.
For more information on working outside the UK, see international business travel: employer responsibilities and terms and conditions for workers in other EU countries.
Where there are no details to be given under any heading, you should say so.
You can download our template for a written statement of employment (PDF, 239K) which you can then print off and complete in your own time.
Implied terms of an employment contract
Contracts of employment contain some terms and conditions that apply even if they are not written down
As well as the oral and/or written terms you actually agree with your employee, an employment contract can also include implied terms.
Implied terms include:
- your duty to provide a secure, safe and healthy environment for the employee
- the employee's duty of honesty and loyal service
- implied duty of mutual trust and confidence between you and the employee
- a term too obvious to need stating, eg that your employee will not steal from you and that you will pay the employee reasonable wages for the work you have employed them to do
- any terms that are necessary to make the contract workable, eg that someone employed as a driver will have a valid driving licence
Some terms and conditions may become implied because you have consistently done something over a significant period, eg made enhanced redundancy payments to redundant employees. This is known as custom and practice. See what a contract of employment is for further information on terms through custom and practice.
The law also imposes some terms automatically, such as the right to a minimum of 5.6 weeks' paid annual leave, the right to be paid at least the National Minimum Wage or National Living Wage (age dependant) and the right not to be unlawfully discriminated against.
Terms and conditions for workers in other EU countries
If you send one of your workers to work in another European Union (EU) member state, you must ensure they receive the basic key terms and conditions of that member state.
For this rule to apply, the worker must be going:
- to another member state under a contract to provide services that has been agreed between your business and another party in that member state
- to another part of your business established in another member state (known as an intra-company transfer)
The rule also applies if you are an employment business that hires out the worker to a user undertaking in another member state. However, an employment relationship must exist between you and your worker during the posting.
Workers in these circumstances are known as 'posted workers'.
Legislation covering posted workers
The legislation that applies to the terms and conditions of posted workers is that covering:
- paid annual leave
- health, safety and hygiene at work
- the employment of children and young people
- maximum work periods and minimum rest breaks
- minimum rates of pay (excluding occupational pension schemes)
- the protection of workers who are pregnant or who have just given birth
- sex, race, disability, sexual orientation, religion/belief and age discrimination
- the less favourable treatment of fixed-term employees and part-time workers
- the conditions of the hiring-out of workers, in particular the supply of workers by employment businesses
For example, if you post the worker to a member state that has a minimum wage that is higher than the wage they normally receive, they are entitled to the minimum wage of that member state.
In addition, you will have to abide by any universally applicable collective agreements which apply in the member state you post workers to.
Posting a worker to another member state may require changing their employment contract. See how to change an employee's terms of employment.
Any terms and conditions in the worker's contract that are more favourable than the minimum requirements continue to apply.
Note that the same rules apply if - as a UK-based employer - you employ a posted worker from another member state.
Tax and National Insurance contributions (NICs)
If you are posting workers to another European Economic Area (EEA) country or Switzerland, generally their social security contributions will be paid in the country where they are carrying out their work. (The EEA is the 28 EU member states plus Iceland, Norway and Liechtenstein.)
However, if you expect that the employee's work abroad will last less than 24 months, you should request for their NICs to continue. To do this, you will need to apply for a Portable Document A1 form. To apply use form:
- CA3821 - employer questionnaire you complete when applying for the first time
- CA3822 - complete for each employee going to work abroad
If you employ a posted worker from another EEA country or Switzerland, you will need to register them in the UK as an employee for tax purposes.
However, if your workers have a Portable Document A1 form from their normal country of employment, you will have to deduct social security contributions in accordance with the rules of their home country instead of NICs.
To find out the regulations on tax and social security if workers are posted to the UK, contact HM Revenue & Customs (HMRC).
Important: The UK has left the EU and there is now a transition period until the end of 2020. This information is still current but could change. Any changes will be documented here. For more information, see Brexit support for employers.
How to change an existing contract of employment
If you want to change an employee's terms and conditions of employment, you will need to get their agreement first. Otherwise, the employee may be entitled to sue for breach of contract, or resign and claim constructive dismissal.
Changes to the written statement
You must tell the employee in writing about any changes to the written statement no later than one month after you have made the change. A change to the statement will still require the employee's agreement.
If the change results from the employee being required to work outside the UK for more than a month, and they will be leaving within a month of the change, you should tell them in writing before they leave.
In most cases, the notification must contain explicit particulars of the change.
However, you may tell the employee about changes to certain particulars such as those listed below by referring to some other document which the employee has reasonable access to:
- entitlement to sick leave, including any entitlement to sick pay
- pensions and pension schemes
- disciplinary rules and disciplinary or dismissal procedures
- any further steps which follow from making an application under the employer's disciplinary, dismissal or grievance procedures
Changes to employment contracts via collective agreements
The terms of a collective agreement are sometimes incorporated into employees' employment contracts.
If - following agreement with the employees' representatives - you change some of these terms, you should inform the employees concerned - ideally in writing.
However, if the changes affect the terms of the written statement, you must inform the employees individually in writing - and must do this within one month of the changes coming into effect.
What information is an employee entitled to receive when there is a change of employer?
When there is a change of employer, a new and full written statement of employment particulars must normally be given to employees within two months.
However, there are some exceptions. You don't need to give a new statement if the name of the business changes without any change in the employer's identity, or if the identity changes in circumstances where the employee can continue their employment, as long as there is no other change in terms and conditions.
However, you must give individual written notification of the change at the earliest opportunity, and at least within one month of when it occurs.
If the change of employer is a result of a business transfer, the terms and conditions of the transferring employees may not usually be changed by the new employer. For more information on employees' rights during and after business transfers, see responsibilities to employees if you buy or sell a business.
Employee enforcement of the right to a written statement
An employee may refer the matter to an Industrial Tribunal where they have:
- not received a written statement of employment particulars
- received a written statement that does not comply with the legal requirements
- not received notification of a change to those particulars
- received notification of a change that does not comply with the legal requirements
A claim for failure to provide a written statement can only be brought when the deadline for providing it, two months after the start of employment or one month after a change in terms, has expired.
If you have given the employee a written statement - or notification of a change to it - but you disagree over the accuracy of particulars recorded, then either you or the employee may refer the matter to a tribunal.
In either case, the tribunal will determine what particulars the employee should have been given. These particulars will have the effect as if you had included them in the written statement, or notification of a change to it, in the first place.
Compensation for failure to issue a written statement
If your employee succeeds in another (unrelated) employment claim, eg unfair dismissal, the tribunal can also award them compensation for your failure to give them a written statement or an accurate or complete statement of change to it - as long as there are no exceptional circumstances that would make this unjust.
The amount of compensation will be two or four weeks' pay (at the tribunal's discretion). A week's pay for this purpose is subject to a statutory limit.
Note that the Labour Relations Agency's (LRA) statutory arbitration scheme cannot accept a claim of failure to provide or update a written statement on its own, as a sole claim, though it may be considered by an LRA arbitrator if it is part of another claim (eg unfair dismissal) or claims under the scheme. The LRA arbitration scheme explained.
Breach of contract claims
If an employee suffers a loss through your failure to observe the terms of their contract of employment, they may make a claim for breach of contract.
Breach of contract claims in Industrial tribunals
An industrial tribunal can only hear a breach of contract claim if the claim either:
- arises on termination of the employee's employment
- is outstanding on the termination of the employee's employment
The claim must also not relate to:
- personal injury
- a term imposing an obligation of confidence
- a term which is a covenant in restraint of trade
- a term relating to intellectual property, eg copyright, rights in performances, moral rights, design rights, registered designs, patents and trademarks
- a term either requiring you to provide the employee with living accommodation or imposing a duty relating to the provision of living accommodation
These rules apply to both employee claims and employer counter-claims.
Awards for breach of contract claims
The tribunal may award an employee damages for their loss, eg a payment of arrears of wages, holiday pay or pay in lieu of notice.
Any award for damages is limited to £25,000.
If the employee wishes to claim more, they cannot first seek £25,000 from an Industrial Tribunal and then go on to seek the balance from a civil court.
Making a counter-claim
You may make a counter-claim to the tribunal if you suffer a loss through the employee's failure to observe the terms of their contract of employment.
However, you can only do this if the employee has already presented a tribunal claim and not since withdrawn or settled it. If the dismissed employee withdraws their breach of contract claim after you have made a claim, your claim can still be considered by the Industrial Tribunal/arbitrator.
Time limits for making a tribunal claim
An employee has three months after the date of their termination of employment to make a breach of contract claim to an Industrial Tribunal. This is irrespective of whether or not an internal appeals procedure is being used.
You may make a counter-claim at any time up to six weeks after you receive a copy of the employee's original application (the ET1 (NI) form).
The tribunal can extend the three-month limit where it considers reasonable and where it is satisfied that it was not reasonably practicable for the complaint to be made within the specified time.
However, the six-week period for counter-claims cannot be extended.
The Labour Relations Agency Arbitration Scheme
Certain claims to industrial tribunals in Northern Ireland can also, as an alternative, be resolved through arbitration using the Labour Relations Agency (LRA) Arbitration Scheme.
Contractual claims outside the tribunal system
Certain types of contractual claim can only be resolved by bringing a claim to the civil courts. These are:
- claims for damages in respect of personal injuries
- claims arising during the course of the employee's employment
- where you want to present a contractual claim against an employee but the employee has not themselves presented a claim to a tribunal
Civil courts can hear claims up to six years after the breach of contract occurred and there is no cap on the amount of damages they can award.