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.

Even if you do not issue a written contract, you are under a legal duty to provide most employees 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.

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 lays out your legal obligations when issuing a contract of employment or a written statement.

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What a contract of employment is

The terms of a contract of employment may be oral, written, implied or a mixture of all three.

These can be found in a variety of places:

• the original job advertisement
• written correspondence, eg letters and emails, between you and the employee
• the principal statement – see the page in this guide on the principal statement 
• the written statement – see the page in this guide on the written statement
• other written agreements
• oral agreements
• your company policies
• an employee/company handbook
• legislation and case law

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 future.

If you issue a written contract, you should include a term stating that it replaces all previous discussions/correspondence in relation to terms of employment provided the employee accepts this.

If you do not have any kind of contract of employment with an employee, you must – at the very least – issue them with a written statement.

If you have some kind of 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.

See the pages in this guide on the written statement and putting together an employee’s written statement.

Download an interactive PDF to create a written statement of employment.

If you intend to employ someone for more than one month, you should consider giving them an employment contract containing all the points required in a written statement.

To find out about your obligations to employees travelling overseas for work, see our guide on sending staff on international business trips.

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The written statement

The written statement is not a contract in itself but – 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.

The only exceptions are employees whose employment began before 30 November 1993 – they are only entitled to a written statement if they request it.

They may request a written statement at any time during their employment or up to three months after it ends.

Individuals who are not employees – eg independent contractors, freelancers and 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.

For more information on working overseas, see our guide on sending staff on international business trips.

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’. See the page in this guide on the principal statement.

You can set out the remaining particulars in either this document or other documents – see the page in this guide on 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 refer to when they want.

You can also Download an interactive PDF to create a written statement of employment which you can then print off and complete in your own time.

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The principal statement

You can set out an employee’s written statement in one or more documents.

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 job title or a brief description of the work.
• 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 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 the page in this guide on putting together an employee’s written statement.

You can also Download an interactive PDF to create a written statement of employment which you can then print off and complete in your own time.

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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. See the page in this guide on the principal statement.

In addition to the information that you must put in the principal statement, you must also give the employee information under the following headings.

Sickness, injury and sick pay – 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 – 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 it’s to end.

Notice periods – the length of notice required from both parties. Rather than stating specific terms, you can refer to the relevant legislation – see our guide on how to issue the correct periods of notice – or to any relevant collective agreement which the employee has a reasonable opportunity to read.

Collective agreements – details of any collective agreements with trade unions that directly affect the terms and conditions of employment.

Pensions – any terms relating to pensions and pension schemes, including whether the employment is covered by a pensions contracting-out certificate.

Dismissal, disciplinary and grievance procedures – some details must be 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:

• any disciplinary rules that you have
• any disciplinary or dismissal procedures that you have
• any further steps that follow an application to resolve a grievance or if the employee is dissatisfied with a disciplinary or dismissal decision

For more information on dismissal, disciplinary and grievance issues, see our guides on dismissal, disciplinary procedures, hearings and appeals and handling grievances.

Employment overseas – details of any terms relating to employment abroad for more than a month.

If a new employee will normally work in the UK but you need them to work abroad 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 employed abroad
• terms relating to their return to the UK
• any additional pay or benefits provided because of employment abroad

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. See the page in this guide on the written statement.

For more information on working overseas, see our guide on sending staff on international business trips.

Where there are no details to be given under any heading, you should say so.

You can also Download an interactive PDF to create a written statement of employment which you can then print off and complete in your own time.

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Implied terms of an employment contract

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
• an 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.

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 and the right not to be unlawfully discriminated against.

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Posting workers elsewhere in the EU

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’.

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 our guide on 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 27 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 certificate A1 from HM Revenue & Customs (HMRC) Residency.

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 an 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 the HMRC Residency Department on Tel +44 191 203 7010.

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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 in writing – and must do this within one month of the changes coming into effect. See the page in this guide on the written statement.

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. See the page in this guide on the written statement.

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 our guide on responsibilities to employees if you buy or sell a business.

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Employee enforcement of the right to a written statement

An employee may refer the matter to an employment 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

If you have given the employee a written statement – or notification of a change to it – but you disagree over what it should contain, 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. For the current limits see the current tribunal compensation limits on the Citizens Advice website [opens in a new window].

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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 employment tribunals

An employment tribunal can only hear a breach-of-contract claim if the claim either:

• arises out of a contract of 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.

Tribunal 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 employment 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 employment tribunal.

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 employment 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 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.

For information on tribunal procedure, see our guide on employment tribunal claims – the process.

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.