Contracts of Employment: A Complete Guide for UK Employees and Employers

Your rights at work begin with the deal you strike with your employer. Contracts of employment are the legal agreements between employers and staff that set out pay, hours, duties and the rules of the working relationship. Whether you are an employee checking a new job offer or an employer preparing paperwork for a new starter, understanding how contracts of employment work under UK law helps you avoid disputes and protect your position.

This guide explains what contracts of employment are, the main types used across the UK, what the law says they must include, what happens when you are working with no contract of employment, and how contracts can be changed or brought to an end. For the wider legal background, see our guide to what employment law covers in the UK.

What Are Contracts of Employment?

A contract of employment is a legally binding agreement between an employer and an employee. It does not have to be a single signed document. Contracts of employment can be written, spoken or partly implied by how the two sides behave. The moment a job offer is accepted, a contract exists, even if nothing has been put on paper.

Most contracts of employment contain a mixture of express terms and implied terms. Express terms are the things actually discussed and agreed, such as salary, working hours and holiday entitlement. Implied terms are added by the law or by custom, whether or not anyone mentions them. Examples include the duty of mutual trust and confidence between employer and employee, the obligation to follow lawful and reasonable instructions, and statutory minimums such as the National Minimum Wage and paid annual leave.

It is also important to know that not everyone who works is an employee. UK law recognises employees, workers and the self-employed, and the level of protection each group enjoys is different. Employees have the fullest set of rights, including protection against unfair dismissal once they have enough continuous service. Someone engaged under a contract for services as an independent contractor is running their own business and is covered by general contract law rather than most employment protections. The label the parties use is not decisive: an employment tribunal will look at the reality of the working relationship.

Types of Contracts of Employment in the UK

Contracts of employment come in several forms, and the right one depends on the nature of the work. The main types used in the UK are set out below.

Permanent employment contracts

The most common type is the permanent, or indefinite, contract of employment. It has no fixed end date and continues until either side brings it to an end by giving notice. Most full-time and part-time staff work under this kind of employment agreement, and it gives the employee access to the full range of statutory employment rights.

Fixed-term contracts

A fixed-term contract of work runs for a set period or until a particular task is finished, such as covering maternity leave or completing a project. The Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 give fixed-term staff the right not to be treated less favourably than comparable permanent employees. If a fixed-term contract is renewed repeatedly, it can become permanent by law after four years of continuous employment.

Zero-hours contracts

A zero-hours work contract does not guarantee any minimum hours. The worker is typically offered shifts as work becomes available. Zero-hours workers are usually classed as workers rather than employees, but they are still entitled to the National Minimum Wage, paid annual leave and protection from discrimination. Since 2015, exclusivity clauses that stopped zero-hours staff working for anyone else have been unenforceable.

Agency and casual work

Agency workers are supplied to a hirer by an employment agency or umbrella company. Under the Agency Workers Regulations 2010, agency workers gain the right to the same basic pay and working conditions as directly recruited staff after 12 weeks in the same role. Casual workers, engaged on an as-and-when basis, should still receive a written statement of their terms and the statutory minimums that match their employment status.

What Your Contract of Employment Must Include

UK law requires employers to give staff a written statement of employment particulars. Since 6 April 2020 this has been a day-one right: it applies from the first day of work and covers employees and workers alike. This is one of the most important features of contracts of employment in the UK, because it turns the key terms of the deal into a written record both sides can rely on.

The written statement must include the names of the employer and the worker, the start date, how pay is calculated and when it is paid, working hours and days, holiday entitlement and holiday pay, the place of work, the notice periods each side must give, and details of sick pay, disciplinary and grievance procedures, and any pension arrangements. Most of this information must be given on day one, with the remaining details following within two months of starting.

Two points matter here. First, the written statement is evidence of the contract rather than the contract itself: the real agreement is what was actually agreed, including verbal promises and implied terms. Second, if the employer fails to provide the statement, the worker can bring a claim in an employment tribunal and may be awarded two to four weeks’ pay on top of any other successful claim. Employers must also notify staff in writing, within one month, of any change to the stated terms.

Employment Without a Contract: Know Your Rights

“I have no contract of employment, what are my rights?” This is one of the most common questions in UK employment law, and the answer reassures many people: employment without contract on paper does not mean employment without rights. As explained above, a contract exists as soon as work is offered and accepted. If there is no contract of employment in writing, the terms are filled in by what was agreed verbally, by implied terms and by statute.

Working with no contract of employment still leaves you with important protections. You are entitled to be paid at least the National Minimum Wage, to receive at least 5.6 weeks of paid annual leave each year, to rest breaks under the Working Time Regulations 1998, and to protection against discrimination under the Equality Act 2010 from day one. Unlawful deductions from wages are also prohibited whether or not you have signed anything.

If your employer will not put your terms in writing, put your request in writing yourself and keep a copy, along with payslips, rotas, offer letters and any messages about pay and hours. These documents help prove what was agreed if there is a dispute. For a fuller picture of the protections that apply with or without a written document, read our guide to employment rights in the UK.

Can an Employer Change Your Contract?

Contracts of employment cannot normally be changed by one side alone. Pay, hours, duties and place of work are contractual terms, and an employer that wants to alter them generally needs the employee’s agreement. Changes are often negotiated directly, agreed through a trade union or staff representatives under a collective agreement, or made using a flexibility clause already in the contract, although tribunals interpret such clauses narrowly.

Where agreement cannot be reached, some employers consider dismissal and re-engagement on new terms, sometimes called “fire and rehire”. This is a high-risk strategy: it can give rise to claims for unfair dismissal, breach of contract and, where many staff are affected, collective consultation obligations. Employees facing imposed changes should seek advice promptly, keep copies of all correspondence and avoid treating silence as acceptance.

Pay cuts are a common flashpoint. In most cases an employer cannot simply reduce contractual pay, and doing so can amount to an unlawful deduction from wages or a breach of contract. Our guide on whether an employer can reduce your salary explains the rules in more detail.

Ending Contracts of Employment and Breach of Contract

Contracts of employment usually end by resignation, dismissal, redundancy, mutual agreement or the expiry of a fixed term. Both sides must normally give the notice the contract requires. Where the contract is silent, the statutory minimum applies: under the Employment Rights Act 1996, an employer must give at least one week’s notice after one month’s service, rising by one week for each complete year of service up to a maximum of 12 weeks. Employees with at least a month’s service must give at least one week’s notice themselves.

Many people confuse wrongful dismissal with unfair dismissal. Wrongful dismissal is a breach of contract claim, typically dismissal without the notice the contract required, and the remedy is usually the pay and benefits the employee would have received during the notice period. Unfair dismissal is a separate statutory right, and most employees need two years’ continuous service to claim it. Breach of contract claims can be brought in an employment tribunal (up to £25,000) or in the county court, and strict time limits apply: most tribunal claims must begin within three months less one day of the employment ending, after notifying Acas for early conciliation.

An employee who resigns because the employer’s conduct has fundamentally broken the contract, for example after serious bullying, demotion or imposed contract changes, may be able to claim constructive dismissal. This is difficult to prove, so evidence and prompt advice matter.

Getting Your Contracts of Employment Right

Well-drafted contracts of employment protect everyone. Employers should issue clear written terms from day one, review template contracts regularly and take advice before changing terms or dismissing and re-engaging staff. Employees should read every contract of work they are offered, query anything unclear before signing, and keep copies of the contract, the written statement and any later variations.

If a dispute arises over pay, hours, changes to terms or dismissal, start by raising it in writing through the employer’s grievance procedure, and consider Acas early conciliation before any tribunal claim. Understanding your contract is the first step. Acting on it in good time is the second.