Creating a clear and comprehensive employment contract is one of the most important tasks for any business owner. An employment contract not only defines the relationship between employer and employee, but it also ensures legal compliance and sets expectations for both parties. Whether you’re hiring your first employee or expanding your team, here’s a step-by-step guide on how to create an employment contract that works for your business.

1. Understand the Legal Requirements

Before creating an employment contract, it’s essential to understand the legal obligations in the UK. According to the Employment Rights Act 1996, all employees are entitled to a written statement of employment, which outlines the main terms and conditions of their employment. This must be provided within two months of starting employment.

The employment contract should comply with UK employment law, including regulations regarding pay, holiday entitlement, sick leave, and termination.

2. Include the Essential Information

Every employment contract must cover several key details. Here’s what you should include:

• Employer and employee details: The contract should begin by identifying the names of both the employer (business) and employee, along with their job titles and work location.
• Job description: Clearly define the employee’s role, responsibilities, and duties. This will help manage expectations and clarify what is expected from both parties.
• Salary and benefits: State the employee’s salary or hourly rate, payment frequency (e.g., weekly or monthly), and any benefits (e.g., health insurance, pension contributions).
• Working hours: Specify the expected working hours, including start and finish times, and any expectations around overtime or flexible working hours.
• Holiday entitlement: Outline the employee’s paid holiday entitlement, which is typically a minimum of 28 days per year, including public holidays.
• Notice period: Define the length of notice required by both the employee and employer to terminate the employment relationship. This can vary depending on the role and duration of employment.

3. Define Terms on Sick Leave and Absences

The contract should specify what happens if the employee is unwell or unable to attend work. Include details on statutory sick pay (SSP), how employees should report absences, and any additional sick leave benefits your business provides. This ensures transparency if an employee ever needs to take time off due to illness.

4. Address Confidentiality and Non-compete Clauses

If your business deals with sensitive information or trade secrets, you may want to include a confidentiality agreement within the employment contract. This ensures that employees understand their responsibility to protect your business’s confidential information during and after their employment.

You may also choose to add a non-compete clause, which restricts employees from working with competing businesses for a certain period after leaving your company. However, non-compete clauses must be reasonable and enforceable, so it’s important to seek legal advice before including one.

5. Highlight Termination Conditions

The contract should clearly state the conditions under which the employment may be terminated. This includes procedures for dismissal, disciplinary actions, and resignation. Make sure to include any grounds for immediate dismissal (e.g., misconduct) and how the termination process should be carried out.

6. Provide for Amendments and Dispute Resolution

Lastly, include a clause explaining how the contract can be amended in the future, as well as how disputes will be resolved. This could involve mediation or arbitration in case of any disagreements between the employer and employee.

Final Thought

Creating an employment contract is a vital step in building a strong, transparent relationship with your employees. A well-written contract protects both your business and the employee, ensuring that everyone is on the same page from the start. While it’s possible to find contract templates online, it’s highly recommended to seek legal advice to ensure the contract complies with all relevant laws and is tailored to your business needs.

By taking the time to create a clear and fair employment contract, you’ll foster a positive work environment and reduce the risk of disputes down the line.