UK Employment Contract Essentials: What Every SME Must Include

A written employment contract protects both you and your employee. Under the Employment Rights Act 1996 (amended by the Good Work Plan), employees are entitled to a written statement of particulars from day one. Missing or outdated contracts are one of the most common compliance risks for UK SMEs - here's exactly what yours must include.

Day-one written statement - what the law requires

Since April 2020, all employees and workers are entitled to a written statement of particulars on or before their first day of employment.

This is a legal minimum, not optional. Failure to provide it can result in a tribunal claim for up to four weeks' pay.

• Full name of employer and employee
• Date employment began and whether previous employment counts for continuity
• Rate of pay, pay period and method of payment
• Hours of work, including if hours may vary
• Holiday entitlement (minimum 5.6 weeks for full-time employees)
• Job title or brief job description
• Place of work or, if no fixed place, a statement to that effect
• Notice periods required by both parties
• Details of any collective agreements affecting employment terms
• Sick pay entitlement and absence reporting procedures
• Probationary period conditions (if applicable)

Common gaps that create legal exposure

Many SMEs use template contracts that predate the Good Work Plan reforms or fail to reflect updated legislation. The most common gaps include:

• No updated flexible working clause - employees now have the right to request flexible working from day one
• Missing carer's leave entitlement - introduced in April 2024, employees are entitled to one week's unpaid carer's leave per year
• Outdated holiday pay calculation - following recent case law, rolled-up holiday pay must be clearly stated where used
• Inadequate intellectual property assignment - particularly important if employees create work product in their role
• No post-termination restrictions - restrictive covenants must be carefully drafted to be enforceable

Probationary periods

There is no statutory right to a probationary period, but they are common and useful. If you include one, be clear on its length, the review process, and what happens if the employee does not pass.

Note: employees can claim unfair dismissal after two years' continuous employment. During probation, the right to a fair process still applies from day one - dismissal during probation for a discriminatory reason remains unlawful.

When to review your contracts

Employment law changes frequently. Your contracts should be reviewed at least annually and whenever there is a significant legislative change. Specific triggers include:

• Changes to the National Living Wage or statutory leave entitlements
• New legislation affecting your sector
• A change in employee's role, hours or place of work
• Any merger, acquisition or TUPE transfer

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