Contract of Employment: Do you need to issue a contract to your employees?

Screen Shot 2014-06-26 at 20.31.54 HR Micro Guide: Employee contract of employment

This HR Micro Guide is designed to give you the employer an overview of the legal employment law requirement to issue a Principal statement / written statement of employment particulars to your employees.  And the business benefit of including this information in an Employee  Contract of Employment.

Do you need to issue a Contract of Employment?


To start with, the moment work is offered to a potential employee, and it is accepted, a legally binding contract of employment is formed.

It does not have to be in writing.


depositphotos_7518289-Employment-ContractHowever, Section 1-4 of the Employment Rights Act 1996 requires basic employment information must be given.

This is known as a Written Statement of Employment Particulars.

It must be issued within two months of starting, but ideally sooner. If an employee is required to go abroad for more than one month, it must be issued before they leave. Only exception is if the work is for less than one month.

Do you need to provide this written statement to everyone who works for you?

No, not if they are independent contractors, freelancers or agency workers.

But I would recommend you do provide terms and conditions in writing for clarity as with any business agreement!

What information must you supply?

Known as the Principal Statement there is a list of key information you have to supply in one document.  Other information required that forms the Written Statement of Particulars can be provided in other documents – for instance a Company Handbook. An example would be how they raise a grievance, or their terms and conditions if they cannot work due to sickness.


What are the penalties if you do not comply?

Fixed penalties

Fixed penalties

Fixed penalties

Unlike other laws, like breaching the Right to Work in the UK law, which carries and automatic fine of up to £10,000 per employee, there is no automatic fine.

However, a tribunal can award 2-4 weeks pay as compensation to any employee who has not been issued them.  Not much I hear you say!

However, for an average employee on £25,000 this could be an award of over £1,900.

You still may not consider this much of a business risk. However, Tribunals also have the power to then make the same award to all other employees of the business who do not have the required information.

If this was only 10 other people suddenly you have a bill for over £19,000 – which is now a significant business cost!

This is quite a high business risk for just not doing something so easy. 


Disputes and problems

What happens if the employment relationship does not work out? If you do not put clear expectations and terms in writing you risk confusion and misinterpretation over duties and obligations. This can lead to unnecessary disputes, which can cost a business valuable time and money in having to deal with them.

You will already know, as with any business relationship, it is always better to clarify clear terms and conditions prior to doing business together. It gives you the element of control and prevents disputes, or misunderstandings later. Why would the employment relationship be any different?

Also, as a business owner, how can you ensure the legal compliance of your business if there are no rules, or procedures for the workforce to follow?

depositphotos_1935388-Pounds-BanknotesThis can lead to a real risk that your business is inadvertently exposed to a discrimination or equal pay claim.

You will have seen on the news that these types of claims have the potential of running into £100,000 on occasions. Most small businesses could not survive this. Having a clear policy and procedure will help prevent this from happening in error.

You will find that not meaning to do something is no defence in a tribunal.

Why a contract of employment?

Whilst you can just issue the Written Statement of Particulars, a contract of employment will give you additional ‘business protection’ clauses.

Like any relationship in life, all is well when both parties are happy and in agreement with one another. But, when something goes wrong, or you need to change something, this is where a good contract of employment will help protect your business and give you a degree of flexibility and control. Let’s look at just a couple of useful contractual clauses that are included:

Variation clause Change is constant. However, whether or not terms and conditions are in writing, or not, you cannot legally just make changes (or vary the terms) when you want to.   To do so brings a risk of a claim for breach of contract. A good employment contact will have a variation clause to enable you to look at this with your employee and make the changes to their contract that your business needs.

Payment in lieu When the employment ends, for whatever reason, there may be a potential business risk allowing your employee to continue to have access to your confidential data, workforce and clients during their notice period. This clause will enable you to remove them from your business with immediate effect and pay them ‘in lieu’. If you do not have this clause you could find yourself in breach of contract if you do so.


Carole ThomsonHello, I’m Carole Thomson and I founded HR Support for Business to give small and medium businesses access to a trusted HR Resource Centre when needed.  No up front registration fees.  You just call on us, or access the employee resources we provide when you need to.

I hope you have found this HR Micro Guide useful.  With so many changes in the world of Employment Law and statutory payments to remember, I will continue to try and provide you with management guides that I feel may be useful to you.

Managing your employees compliant to the changeable law, can be complex to manage.  Needless to say, therefore,  if I can be of any help please do not hesitate to contact us.

We offer a 30 no obligation free phone consultation to discuss your business needs and how HR Support for Business can help you. 


HR eStore iconOr, why not check out our HR e-Store and have a look at the HR e-Toolkit:  Employee Contract and Employee Handbook .

We not only include an Employee Handbook  with the key procedures we will write you four contracts of employment bespoke to your business and contractual needs.

You will find the HR e-Toolkits  are a very cost effective way for a business to access a professional and trusted HR resource to manage your people, meet your legal requirements and protect your business.  Why not have a look.

HR Newsroom IconIf you have found this HR Micro Guide useful, why not have a look around our HR Newsroom and see if there is anything else we have posted that may be  useful to you.

Perhaps our latest Employers Newsletter or Employment Facts and Stats update   Combined these two documents will inform you of key employment law changes and the up to date statutory rates that will effect your business.  And of course, they are free of charge.

depositphotos_34185191-Register-Computer-Keyboard-Key-Enroll-Enter-Store-SiteYou also have the option to register your details over on the right hand side of any of the News Pages and we will then send you future updates ‘hot off the press’ as they are published.



Carole Thomson Chartered FCIPD, Tech IOSH
Senior HR Consultant and Trainer
HR Support for Business
Tel: 078994 25916/ 079412 62492 /01295 788 579  /in/carolethomson

About Carole Thomson

Following 16 years implementing HR solutions for businesses I founded HR Support for Business. Designed to be a one stop trusted HR Resource centre for small and medium businesses. Working locally or virtually we can be your HR team member when you need us. Or give SMEs access to tried and trusted HR contracts, policies and documentation. A self service HR resource to make it easier for SMEs to manage their people and save time and money in development and management time.

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