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Employment contracts, the essentials for employers

What the law makes you give a new starter on day one, where employment status goes wrong, which covenants hold up, and what the paperwork costs.

They start on Monday and nothing has been written down yet. The deadline is real: a written statement of the main employment terms must be in the hands of every employee and worker on or before their first day. That is a day-one duty under the Employment Rights Act 1996, not good practice, and failing it can add an award of two or four weeks' pay where the employee later succeeds in another tribunal claim — a small penalty bolted onto a much bigger bad day.

The statement is the floor, not the ceiling. It has to cover pay, hours, holiday, place of work, notice, probation, sick pay, other benefits and training entitlements. The things you actually want as an employer — confidentiality, intellectual property, restrictive covenants, garden leave — live in the full contract that sits on top of it. This guide covers what the law requires, where employment status goes wrong, which covenants hold up, and what the paperwork costs. It is general legal information, not advice on a specific hire or dismissal.

Not sure which documents you are required to have? Our free employment documents checker asks nine questions and returns what the law requires, what you are missing, and what each gap costs.

What has to be in their hands on day one

The written statement of particulars has a specified content list, and the common failure is not disagreeing with it but forgetting it in the rush of onboarding. It must set out:

Workers get one too, not only employees, which catches out businesses using casual or zero-hours arrangements and assuming the duty does not apply to them.

Employee, worker or contractor?

Status is decided by the reality of the relationship, never by the label on the invoice or the heading on the agreement. The questions a tribunal asks are practical: how much control you have over how, when and where the work is done; whether they must turn up personally or can send a substitute; whether there is an ongoing obligation to offer and accept work; how far they are integrated into your business; who provides the equipment; and who carries the financial risk.

Getting it wrong is expensive twice over — back-dated holiday pay, notice and employment rights on one side, unpaid PAYE and National Insurance with interest on the other. And there is a third category that catches a great many arrangements people believe are self-employment: worker status carries holiday pay and the minimum wage without the full set of employee rights. Decide on the facts, write down why you reached that view, and keep it with the file. IR35 status determinations are a tax question for your accountant rather than a legal one for us.

In practice · illustrative example — the contractor who was really an employee

A made-up scenario written to show how the tests apply, not an account of a real matter, and no outcome is being promised. A studio pays a designer £2,800 a month as a self-employed contractor for two years. In reality she works set hours, uses the studio's equipment, cannot send a substitute and takes holiday like everyone else. When the arrangement ends and she brings a claim, the wording on the invoices counts for very little against the day-to-day reality. The exposure — back-dated entitlements on one side, tax on the other — dwarfs the admin of setting it up properly at the start.

Probation is not a rights-free zone

A probationary period does two useful things: it sets a review point, and it usually sets a shorter notice period for that window. It does not remove anybody's statutory rights. Discrimination protection applies from the first hour of the first day, throughout probation, so ‘they were still on probation’ is not a defence to anything. Use it as a structured way to assess a new hire, with the review actually diarised, rather than as a period where process does not apply.

Notice: the floor, and the two clauses you need

Statutory minimum notice from you is one week after one month's service, then one week for each complete year, capped at twelve weeks after twelve years. You can agree longer in the contract; you can never agree shorter. The employee's notice to you is one week under statute after a month's service, and it is worth setting a longer contractual period for a role that would be hard to replace — while staying realistic, because a six-month notice period you would never enforce is decoration.

Two clauses are worth having before you need them. A payment in lieu of notice clause lets you end the employment immediately and pay the notice out instead of having it worked; without one, paying instead of working notice is itself a breach of contract, which can free the employee from their covenants. Garden leave keeps a departing employee on the payroll but away from clients and systems during their notice. Both are far easier to rely on when the contract provided for them in advance than when they are improvised on the day.

The clock that does not protect you

Ordinary unfair dismissal claims generally need two years' continuous service, and that threshold is changing: the Employment Rights Act 2025 reduces the qualifying period for ordinary unfair dismissal from two years to six months, and the government has stated its intention to bring the change into force on 1 January 2027, so dismissals taking effect before that date still fall under the two-year rule.

Either way, treating the qualifying period as a free hand is the mistake. Discrimination and whistleblowing claims have no qualifying period at all, and a list of automatically unfair reasons applies from day one — dismissals connected to pregnancy, to raising a health and safety concern, or to asserting a statutory right among them. A dismissal that looks arbitrary is what sends someone looking for a claim that needs no qualifying period. A short, documented process costs you a day and removes most of the argument.

Restrictive covenants: narrow beats sweeping

Clauses stopping an ex-employee competing, poaching clients or poaching colleagues are enforceable only so far as they are reasonable to protect a legitimate business interest — trade connections, confidential information, a stable workforce. Drawn too widely in duration, geography or scope, they fail, and a court will not redraft an unreasonable clause to save you. It may delete a clearly severable part; it will not rewrite the bargain.

Two practical consequences. Reasonableness is judged as at the date the clause was agreed, not the date you try to rely on it, which is why the same covenant pasted into every contract from junior to director is a problem — it was never reasonable for the junior. And a tightly drawn non-solicitation clause covering customers the employee personally dealt with is usually worth more than a sweeping non-compete, because it is the one a court will actually uphold. An over-broad covenant is worse than none: it gives false comfort right up to the moment you need it.

In practice · illustrative example — the friendly hire with no paperwork

A made-up scenario, not a real client. A small agency takes on a friend of the founder as its first employee on a verbal ‘we'll sort the details later’. Fourteen months in, the relationship sours. There is no written statement, no agreed notice, and nothing protecting the agency's client contacts. When the employee leaves they take two clients worth around £1,500 a month each, and the agency has nothing on paper to point to. A day-one contract with a modest, reasonable non-solicitation clause would have taken an hour to put in place.

Contract or handbook: which document says what

Keep the two apart deliberately. The contract holds the binding individual terms: pay, hours, notice, holiday, the core promises. The handbook holds how things are done day to day: sickness reporting, disciplinary and grievance procedures, expenses, conduct, remote working. The reason to split them is flexibility — you can update a policy as the business changes without renegotiating every individual's contract.

That only works if the handbook is expressed as non-contractual guidance, except where it states otherwise. Make the handbook contractual and you have committed yourself to following every procedure in it to the letter, which is the opposite of what you wanted from it.

Changing terms once someone is in post

Anything in the written statement has to be notified in writing within a month of the change taking effect. More importantly, changing contractual terms generally needs the employee's agreement: imposing a pay cut, new hours or a different location unilaterally risks a constructive dismissal claim and an unlawful deduction claim at the same time. The usual routes are agreement in exchange for something, a genuine flexibility clause used reasonably, or consultation — and at the far end, with real risk and its own statutory code, dismissal and re-engagement. Start from the contract you actually have rather than the one you assume.

Where a solicitor is required

Two places, and they are worth knowing in advance. A settlement agreement is the only way an employee can validly waive their statutory employment claims, and the law requires them to receive independent legal advice from a relevant adviser for it to bind — so these route through a solicitor. And defending a tribunal claim is contentious work. Both go to RHF Solicitors (authorised and regulated by the SRA, no. 324115). Everything upstream — the contracts, the statements, offer letters, policies, handbooks, covenants and the process you follow — is non-reserved, and it is what decides how the contentious stage goes.

What employers get wrong

What to do next

Before the start date, do four things: decide the genuine status of the role and note why; send a written offer with the headline terms; get the written statement into their hands on or before day one; and set a probation review date in the diary rather than in your head. If you are inheriting contracts rather than writing new ones, the free employment documents checker will tell you what is missing in about two minutes.

If you want the paperwork done for you, the employment starter pack is from £895 +VAT and covers the employment contract and written statement, an offer letter, a confidentiality agreement, a contractor agreement template, and restrictive covenants drawn narrowly enough to stand a chance of being enforced. HR policies with a staff handbook are from £1,495 +VAT. If you would rather have it as ongoing cover, Virtual HR Manager is £499 +VAT a month on a 12-month agreement and includes that employment setup within the fee. Not included in any of them: right to work checks, payroll and pension set-up, IR35 status determinations, which are a tax question for your accountant, and defending a tribunal claim, which goes to RHF Solicitors. Send the role, the hours and the start date through the enquiry form and the first call is free.

General information

This is general legal information, not advice on your situation. For advice tailored to your business, book a legal review. Buzz Legal provides non-reserved business legal support; reserved legal activities are carried out by RHF Solicitors, authorised and regulated by the SRA (no. 324115).

On this page What has to be in their hands on day one Employee, worker or contractor? Probation is not a rights-free zone Notice: the floor, and two clauses you need The clock that does not protect you Restrictive covenants: narrow beats sweeping Contract or handbook: which says what Changing terms once someone is in post Where a solicitor is required What employers get wrong What to do next Related Fixed-fee work and prices Subscription plans Guide: staff handbooks and policies Restrictive covenants that hold up

Common questions

When do I have to give an employee a contract?

A written statement of the main employment terms must be given to employees and workers on or before their first day. It is a day-one right under the Employment Rights Act 1996, and the required contents are specified: pay, hours, holiday, place of work, notice, probation, sick pay, other benefits and training entitlements among them. A full contract goes further and adds the protections you actually want — confidentiality, intellectual property, restrictive covenants, garden leave — but the statement is the legal floor. Failing to provide one can add an award of two or four weeks' pay where the employee succeeds in another tribunal claim, which is an avoidable addition to an already bad day.

How much notice do I have to give an employee?

Statutory minimum notice is one week after one month's service, then one week for each complete year, capped at twelve weeks after twelve years. You can agree longer in the contract but never shorter. The employee's notice to you is one week under statute after a month's service, and it is worth setting a longer contractual period for roles that would be hard to replace — though be realistic, because a long notice period you cannot practically enforce is decoration. If you want the option to pay in lieu rather than have someone work their notice, the contract needs a payment in lieu clause; without one, paying instead of working notice is itself a breach.

Can I dismiss someone freely in their first two years?

Not freely. Ordinary unfair dismissal claims generally require two years' continuous service, so a short-serving employee usually cannot bring one. But discrimination and whistleblowing claims have no qualifying period, and a list of automatically unfair reasons applies from day one — including dismissals connected to pregnancy, raising a health and safety concern, or asserting a statutory right. The Employment Rights Act 2025 cuts that qualifying period to six months, intended to take effect on 1 January 2027. Follow a fair process regardless: a short, documented process costs a day and removes most of the argument, whereas a dismissal that looks arbitrary invites the employee to go looking for a claim that needs no qualifying period.

Are non-compete clauses enforceable?

Only so far as they are reasonable to protect a legitimate business interest such as trade connections, confidential information or workforce stability. Clauses drawn too widely in duration, geography or scope fail, and a court will not narrow an unreasonable clause to save it — it may delete a clearly severable part, but it will not redraft. Reasonableness is assessed as at the date the clause was agreed rather than the date you try to rely on it, which is why the same covenant in every contract from junior to director is a problem. A tightly drawn non-solicitation clause covering customers the employee personally dealt with is usually worth more than a sweeping non-compete.

Does calling someone a contractor make them one?

No. Employment status turns on the reality of the relationship — control, personal service, mutuality of obligation, integration into the business, who provides the equipment and who carries the financial risk — not on the label on the invoice or the wording of the agreement. Getting it wrong is expensive twice over: back-dated holiday pay, notice and employment rights on one side, unpaid PAYE and National Insurance with interest on the other. There is also a third category, worker, which carries holiday pay and the minimum wage without full employee rights and catches a great many arrangements people assume are self-employment. Decide on the facts and record why you reached that view.

What has to happen when someone's terms change?

Anything in the written statement must be notified in writing within a month of the change taking effect. More importantly, a change to contractual terms generally needs the employee's agreement: imposing a pay cut, a change of hours or a new location unilaterally risks a constructive dismissal claim and an unlawful deduction claim at the same time. Where you need change, the usual routes are agreement in exchange for something, a flexibility clause if the contract genuinely has one and it is used reasonably, or consultation and — at the far end, with real risk and its own statutory code — dismissal and re-engagement. Start from the contract you actually have rather than the one you assume.

What does the employment paperwork cost?

An employment starter pack starts at £895 +VAT and covers the employment contract and written statement, an offer letter, a confidentiality agreement, a contractor agreement template, and restrictive covenants drafted narrowly enough to stand a chance of being enforced. HR policies with a staff handbook start at £1,495 +VAT. If you would rather have ongoing cover, Virtual HR Manager is £499 +VAT a month and includes the employment setup within the fee on a 12-month agreement. Not included in any of them: right to work checks, payroll and pension set-up, IR35 status determinations, which are a tax question, and defending a tribunal claim, which goes to RHF Solicitors.

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