Guide to our Employment Contract Template

Posted by David Cammack on 10th June 2015

This is a summary of the complete guide that is included when you download our our Employment Contract template. The template constitutes a formal contract of employment for use by an employer to set out the terms of employment of permanent, temporary, full-time or part-time employees. This Employment Contract contains all the clauses necessary to satisfy the legal requirements for an employer to provide a written statement of the terms and conditions of employment to an employee, which should be done within two months of their commencement of employment.

This employment contract is suitable for most junior employees. For senior staff (e.g. salesmen and managers) you may find our service agreement more suitable – it includes features such as non-competition restrictive covenants, which you might need for senior staff, i.e. staff who you would not want to leave you and go to work for a competitor immediately.

The contract is suitable for use with staff who are:

1. full-time or part-time; and

2. fixed-term, permanent or temporary.

All the usual variable matters, such as rate of pay, hours to be worked, holiday entitlement and termination of employment, can be customised to suit your requirements within this template. You can provide for any rate of pay, provided that it meets the National Minimum Wage. You can provide for any notice period that matches or exceeds the minimum length required by law. (The notes below expand on this at the relevant points.)

Clauses in the Employment Contract

Date – Only the year should be inserted for now. The remainder can be added by hand when the agreement has been signed by everyone.

Party clauses – The names of party 1 (the Employer) and party 2 (the Employee) should be filled in. Include the company name, registered number and registered office and also the name and address of the employee. If the Employer is not a limited company, you can change the Employer details to state the name and address of a partnership or person.

Numbered clauses

1. Interpretation – Here we have defined the key terms used.

  • Business Day – This is only used in clause 8.1 regarding the timing of salary payment.
  • Confidential Information – This is used in clause 17 to protect the Employer’s important information.
  • Work – This is the work that the Employee will do as set out in clause 5 in general terms.

2. Commencement and Continuation of Employment – You should insert the Employee’s start date in clause 2.1 and select the option showing whether they are about to start or have already started. Clause 2.2 refers to the period of continuous employment – note whether any previous employment counts, for example when staff transfer due to a takeover of another business (under the “TUPE” Regulations), normally the employment with the previous employer will count – if it applies, fill in the relevant details.

Clause 2.3 includes a promise from the employee that he is entitled to work in the UK, but this does not change the fact that the onus is on the employer to have checked the employee’s papers and established that he has a right to work here or there can be very harsh fines for employing illegal workers. For a government guide on preventing illegal working see this guide here.

Section 2 of that guide mentions the document checks you need to do to establish a right to work in the UK; section 10 mentions the fines for non-compliance.

3. Period of probation – Fill in the length of the probation period and the maximum extension period, to be used if the employee is not up to scratch by the end of the original period but you think he deserves a second chance. These periods should be no longer than is reasonable. During the probation period, clause 3.3 states that you can terminate the Employee’s employment on one week’s written notice. If the staff are temporary on a short-term basis, you might want to delete this whole clause and later references to a probation period (see clauses 4.2, 4.3, 12.1 and 12.2).

4. Job title, engagement and length of engagement – In clause 4.1 you should insert the Employee’s job title and the name of the supervisor or line manager that they will report to, if relevant to your business.

Employment law sets out minimum periods of notice that must be given to employees depending on how long they have been working for the employer. The legal minimum is one week for between one month and two years’ of continuous employment and one additional week for each full year of employment after that, up to a maximum of 12 weeks’ notice. You can provide for longer than the statutory minimum, but not less.

Clause 4.2 provides for the common period of 1 month’s notice on either side from the end of the probationary period, but this can be amended. The optional sentence at the end of clause 4.2 provides that if the employer wishes to dismiss the employee immediately without good cause, it can do so without this being a breach of contract (and theoretically while preserving the validity of any restrictive covenants – although these are not included in this template, as it is intended for junior employees). The only downside to this is that any pay in lieu of notice is taxable; while it would not be if paid as compensation for breach of contract. Delete clause 4.4 if it doesn’t apply.

If the employee is to be a temporary worker or on a fixed term contract, you may like to add an additional clause to state the fixed term, along the following lines and for fixed-term workers consider whether you are keeping clause 4.2, which permits earlier termination on notice:

For a temporary worker:

“4.5 The Employee is engaged on a temporary basis (subject to earlier termination in accordance with the terms of this agreement) which is intended to continue for [PERIOD].”

For a fixed-term worker:

“4.5 The Employee is engaged on a fixed term (subject to earlier termination in accordance with the terms of this agreement) which shall end on [DATE] unless such term is renewed or extended by agreement of both parties.”

For a temporary worker you would then need to give notice in accordance with clause 4.2 to end the employment, as it will not automatically come to an end (if you wish it to, you should choose the fixed-term wording instead) and, if no such notice is given, the employment will roll on after that period.

For fixed-term workers, you should note that a failure to renew a fixed-term contract could constitute an unfair dismissal, so should be dealt with carefully to avoid a tribunal claim if the employee (a) alleges discrimination or (b) has accrued the 2-year qualifying period of continuous employment to bring an unfair dismissal claim.

5. Employee’s duties – You should attach a job description to the contract. This should specify all the duties that the Employee is expected to carry out. Any material amendment to these duties will constitute a change in their terms and conditions of employment, to which you need their consent – you should not impose unilateral changes. If you do not have an employee handbook, delete the reference to this at the end of clause 5.2. For clause 5.4, please review and amend these statements as best suits you. In case the employee might need to use his car for “business use” (this can include driving between different offices of the business during the working day, as well as visiting customers or attending other business events or conferences), we have included clause 5.6 to say that he should ensure it is insured for this type of use at his own expense.

6. Working times – In clause 6.1, fill in the normal hours to be worked and lunch break time. Delete clause 6.2 if there is no clocking in or time recording system that applies. When stating the Employee’s working hours, you should have regard to the Working Time Regulations. Clause 6.4 does not enable you to require the Employee to work for longer than the maximum period allowed under the Regulations. This will depend on the nature of the work but for most employees it is not more than 48 hours a week on average.

An Employee can contract out of the maximum limit. Such agreement must state expressly that he is contracting out of the Regulations and must be in writing in the employment contract or elsewhere and signed by the Employee.

7. Location – Here you should enter the address of the main place of work of the Employee. It is a good idea to complete the second part of clause 7.1 and clause 7.2 if the Employee may have to work elsewhere at all during their employment, as otherwise making them do so may constitute a change in their terms and conditions to which you would need their consent. In clause 7.3, you should state whether the Employee might be required to work abroad for more than one month during the course of their employment.

8. Remuneration and other benefits – The Employee’s gross wages/salary should be entered in clause 8.1 and the date of its payment each month. You can amend or delete clauses 8.2 to 8.4 as appropriate to your business. You can amend clause 8.7 to state “reasonable” expenses if you wish or specify which particular types of expenses will be reimbursed. Delete the reference to the employee handbook if it is not applicable.

9. Pensions – This clause leaves it to you to enter details of your company pension scheme. At present, employers must offer their employees access to either a stakeholder pension scheme or the company’s occupational pension scheme. You should state which applies in clause 9.1. In clause 9.2 you should state whether the scheme is or is not contracted out of the state second pension – most modern schemes are no longer permitted to be contracted out. In April 2016, contracting-out on the Contracted Out Salary-Related basis is also due to be abolished.

From 2012, the Pensions Act of 2008 requires employers to automatically enrol any employees who are over 22, who earn over a basic amount and who are not already in one, into a Qualifying Workplace Pension. This is a scheme that involves compulsory employer’s contributions equal to or in excess of a minimum percentage of the employees’ earnings.

If you do not operate or set up such a scheme, you must enrol your employees into the Government’s default scheme, “NEST”, when your auto-enrolment “staging date” is reached, as advised by HM Revenue & Customs. These staging dates are being phased in over a number of years until 1 February 2018 – your staging date depends on (a) how many employees you have and (b) whether you were formed before or after 1 October 2012.

10. Holidays – Full time employees have a minimum entitlement to 5.6 weeks’ paid holiday under employment law. You can offer them more than this if you wish to. The minimum entitlement can be inclusive of the 8 bank and public holidays or you can offer these in addition. You can control when and how employees take their holiday and can add additional clauses to the contract to deal with this. Fill in the relevant details in clauses 10.1 and 10.2. In clause 10.4 fill in the dates of your holiday year.

11. Sickness and other absence – These clauses are standard and designed to ensure that you are kept well informed about the Employee’s absences/sickness. Fill in the details in clause 11.1.

12. Sick pay – Under employment law Employees are entitled to statutory sick pay (SSP) for up to 28 weeks of sick leave. Clause 13.2 also provides for the Employee to receive company sick pay for up to 20 days once they have completed their probation. Company sick pay can be any amount in excess of the statutory minimum (SSP) entitlement.

You do not have to offer a company sick pay scheme so can delete clause 13.2 if you wish or amend it to offer a different (a) rate of pay, (b) qualifying period or (c) length of entitlement to the company sick pay. If you do not offer company sick pay, SSP must still be paid. The current standard weekly rate of SSP can be found on the Government’s website at https://www.gov.uk/statutory-sick-pay/overview.

13. Summary termination – Summary termination can occur where an employee has committed a fundamental breach of their terms and conditions of employment. It means that you can terminate their employment immediately upon written notice, without having to provide the notice period in clause 4.2.

You can only summarily terminate an employee’s employment if the breach is serious enough. This clause specifies some examples of serious misconduct that may permit summary termination for the Employee’s information, but it is not exhaustive. You should take legal advice before summarily terminating an employee’s employment.

14. Grievance – You should set out details of your company’s grievance procedure in your employee handbook and provide the Employee with a copy. In clause 14.1 fill in the relevant name or position.

15. Disciplinary – You should set out details of your company’s disciplinary policy and procedure in your employee handbook and provide the Employee with a copy. In clause 15.2 fill in the relevant name or position.

16. Company property – In clause 16.2 fill in the name or position of the person to whom property should be returned at the end of the employment.

17. Confidential information – Clause 17 is a basic confidentiality provision that is designed to protect your company’s confidential information. It is recommended that you include a comprehensive confidentiality policy in your employee handbook and consider asking the Employee to sign a separate more detailed confidentiality agreement if the Employee will have access to highly sensitive information during the course of their employment.

18. Administrative matters – Fill in the names or positions of the people to be contacted and the relevant location the employee normally works at in clauses 18.1 and 18.2.

19. Other employment – This provides a basic rule that the employee should not work elsewhere and certainly not carry out a similar role for a competitor while working for you.

20. Collective agreement – If there is a collective agreement with a trade union that applies to the employer then fill in the details and delete the first of the two options. If there is not, then state this by keeping the first of the two options and deleting the second.

21. Data protection – Clause 21 provides the requisite consent needed under the Data Protection Act for you to handle and process any personal data about the Employee, such as their HR file, salary payments and sickness records.

22. Variation – This confirms the rule that you cannot make unilateral changes to the terms of the agreement – you need both parties to agree.

This is a summary guide – a complete version is included with the template download. Do browse our full range of employer and employee templates that we have available as we have a comprehensive range of templates that will enable you to keep your company compliant and protected regarding its employees.

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