What To Include In An Employment Contract: Key Terms For UK Employers

Hiring your first employee (or even your tenth) is a big step for any small business. You’re not just bringing someone into the team - you’re taking on legal obligations, people management responsibilities, and commercial risk.

That’s why many employers ask the same question: what should be included in an employment contract?

A well-drafted employment contract helps you set expectations, comply with UK employment law, and protect your business if things change later (for example, if performance drops, an employee leaves, or a dispute comes up).

Below, we’ll break down the essential terms UK employers should include, plus the “smart extras” that can save you a lot of stress later on.

Do I Need An Employment Contract (Or Just A Written Statement)?

In the UK, employees have the right to receive a written statement of employment particulars. This requirement comes from the Employment Rights Act 1996 (and subsequent changes), and it’s often misunderstood.

Here’s the practical difference:

• A written statement of particulars is the minimum information you must provide (such as pay, hours, and holiday entitlement).
• An employment contract is the broader legal agreement between you and the employee - and it can include extra protections and workplace rules that are vital for small businesses.

In real life, most employers roll these into a single document: an “employment contract” that includes the legally required particulars plus additional terms that protect the business.

If you’re putting one in place, it’s worth doing properly. A generic template can miss key terms, create ambiguity, or accidentally contradict your actual working practices - all of which can make disputes harder (and more expensive) to resolve.

If you need a contract drafted for your role and workplace, an Employment Contract can be tailored to your business and the realities of how your team operates.

What Should Be Included In An Employment Contract As Standard?

To answer the key question of what should be included in an employment contract, start with the essentials you’ll typically want for almost every employee role.

These terms help you meet legal obligations, reduce misunderstandings, and create a clear working relationship from day one.

1) Who The Parties Are And The Start Date

This sounds obvious, but it’s important to be precise:

• the full legal name of the employer entity (for example, your limited company name)
• the employee’s full name
• the employee’s start date
• any continuous service date (if relevant)

This helps avoid issues later when calculating notice, redundancy rights, or eligibility for certain benefits.

2) Job Title, Duties, And Reporting Lines

A contract should clearly state the employee’s job title and outline their duties. For small businesses, it’s also common to include flexibility such as “other duties within reason” - because roles can evolve quickly as you grow.

It’s also helpful to set out who they report to and whether the role requires working at multiple sites or travelling.

3) Place Of Work (Including Hybrid/Remote Arrangements)

Even if your employee is fully remote or hybrid, you should still specify:

• their main place of work (e.g. home address for remote staff)
• any requirement to attend your premises or client sites
• whether you can change their workplace location (and how much notice you’ll give)

This is especially important if you may relocate premises, expand into new locations, or restructure roles.

4) Pay (Salary/Wages), Payment Frequency, And Deductions

Your contract should state:

• the rate of pay (hourly wage or salary)
• how often you pay (weekly/monthly)
• how pay is calculated (particularly for shift work or variable hours)
• any overtime rules (if overtime is paid, and at what rate)
• any lawful deductions (for example, repayment of overpaid wages or training costs, if you include a clause)

Be careful with anything commission-based or performance-based - if you intend to use targets or discretionary bonuses, the wording needs to be clear so you don’t accidentally create guaranteed entitlements.

5) Working Hours And Rest Breaks

Working time is one of the biggest areas where expectations can drift. Your employment contract should cover:

• normal working hours (start and finish times, days of the week)
• whether there is flexibility (e.g. shift patterns or rota changes)
• rest breaks and unpaid breaks
• overtime expectations (and whether overtime is mandatory)

The Working Time Regulations 1998 set rules on maximum weekly working time, rest breaks, and rest periods. If you need a deeper understanding for your workplace arrangements, the Working Time Regulations guide is a helpful starting point.

6) Holiday Entitlement (And Bank Holidays)

Your contract should clearly set out annual leave entitlement and how it’s taken. Many disputes happen simply because the contract is unclear on whether bank holidays are included.

Be specific about:

• total holiday entitlement (in days or hours)
• whether bank holidays are included or “on top”
• how holiday accrues in the first year
• how to request leave and how much notice is required
• what happens on termination (payment in lieu, or deductions for overtaken leave)

If you use the phrase “inclusive of bank holidays”, it’s important you and your employee interpret it the same way. The article on inclusive of bank holidays explains what this usually means in practice.

7) Sickness Absence And Sick Pay

Your contract should state any entitlement to contractual sick pay (if offered) and how sickness reporting works, including:

• when the employee must notify you
• who they notify
• when a fit note is needed
• how absence is recorded and monitored

You can also cross-reference your sickness absence policy (often in your staff handbook) to keep operational detail out of the contract.

8) Notice Periods

Include notice periods for both employer and employee. You must meet statutory minimum notice, but many employers choose longer notice periods for key roles.

It’s also common to include:

• a right to pay in lieu of notice (PILON)
• garden leave provisions for sensitive roles (where the employee stays employed but does not work during notice)

These clauses can be crucial if an employee is leaving for a competitor or holds confidential information.

Which Clauses Protect Employers Most (And Why)?

The “required” terms keep you compliant. The next set of clauses is where you can seriously reduce risk as an employer - especially if you’re a small business and one employment issue can take up a lot of time (and cashflow).

Probation Period

A probation period gives both sides a chance to confirm the role is the right fit. For employers, it’s a practical way to:

• set performance expectations early
• use shorter notice periods during the initial period
• review conduct, reliability, and capability before confirming ongoing employment

Probation isn’t a “free pass” to ignore fair process, but it can make early-stage management much easier when it’s clearly drafted. The probation periods guide explains what employers should consider.

Confidentiality

If your employee will have access to sensitive business information, a confidentiality clause is a must. This often covers:

• client lists and supplier terms
• pricing, margins, and financial information
• trade secrets and internal processes
• business plans and strategy

It’s also helpful to clarify what happens to confidential material when employment ends (returning documents, deleting files, etc.).

Intellectual Property (IP) Ownership

Many small businesses forget about IP until it’s too late. If an employee creates content, software, designs, training materials, marketing assets, or internal systems, you’ll usually want the contract to clearly confirm who owns the IP created in the course of employment (and to deal with any grey areas up front).

This becomes especially important if you plan to sell the business, raise investment, or licence your content.

Restrictive Covenants (Non-Compete, Non-Solicit, Non-Poach)

Restrictive covenants can help protect your client relationships and team stability when someone leaves. Common examples include:

• non-solicitation (they can’t approach your clients for a period)
• non-dealing (they can’t work with certain clients even if approached)
• non-poaching (they can’t try to hire your staff)
• non-compete (they can’t work for a competitor for a period - usually the hardest to enforce)

These clauses need to be reasonable and tailored to the role and the business interest you’re protecting, otherwise they may be unenforceable. Getting this right upfront is far easier than trying to “add it in later” after an employee has accepted an offer.

Disciplinary And Grievance References

You don’t have to squeeze every HR process into the contract itself. Instead, many employers include a clause saying that disciplinary and grievance procedures are set out in a separate policy or staff handbook.

This is useful because policies can evolve as your business grows, without you needing to vary each employee’s contract every time.

If you’re managing disciplinary issues, it’s worth understanding what “gross misconduct” typically covers and what process to follow. The gross misconduct checklist can help you sense-check your approach.

How Do I Deal With Common “Extras” Like Training, Monitoring, And Data Protection?

Some contract clauses aren’t legally required, but they’re increasingly important for modern workplaces - especially where you rely on systems, software, customer data, or paid training.

Training Costs And Development

If you pay for significant training, consider including a training repayment clause (sometimes called a clawback clause). Whether it’s enforceable will depend on how it’s drafted and whether it’s reasonable in the circumstances.

Use Of Company Property And Acceptable Use

If employees use company laptops, phones, email addresses, or access internal systems, your contract (or linked policies) should set expectations about acceptable use, confidentiality, and security.

If you monitor internet usage or work devices, you’ll want to think about privacy and transparency. The monitoring employees’ computers article explains the key legal and practical issues to consider.

Data Protection And GDPR

As an employer, you’ll handle employee personal data (payroll details, addresses, right to work documentation, performance notes, and sometimes health data). You also might give employees access to customer data.

Your contract can support your data protection compliance by including obligations like:

• following internal data protection and security rules
• reporting suspected data breaches promptly
• handling confidential data appropriately

It’s also important that your wider business has the right documents and practices in place (like privacy information for staff and customers, and appropriate security measures). For many businesses, a Privacy Policy is part of that broader compliance picture.

What Mistakes Should Employers Avoid When Drafting Employment Contracts?

Most employment disputes don’t start with bad intentions - they start with unclear paperwork and assumptions on both sides. If you’re putting contracts in place (or updating old ones), here are common pitfalls to avoid.

Relying On A One-Size-Fits-All Template

Templates can be a useful starting point, but they often:

• miss role-specific terms (like commission structures or shift patterns)
• include clauses that don’t match how you operate
• use outdated language that doesn’t reflect current expectations
• fail to include enforceable protections (especially restrictive covenants)

For small businesses, one unclear clause can create weeks of distraction when you should be focused on customers and growth.

Including Terms You Don’t Actually Follow

If your contract says one thing but your workplace does another (for example, you routinely allow extra paid leave, flexible hours, or informal bonuses), you can accidentally create implied contractual rights over time.

In other words: how you behave as an employer can become evidence of what the contract “really” is.

Being Vague About Holiday, Notice, Or Pay

Holiday and pay are high-dispute areas. Clear drafting is your best protection. If you’re not sure how to structure holiday entitlements (especially around bank holidays), it’s better to clarify it now than argue about it later.

Forgetting About Policies And Handbooks

Your employment contract shouldn’t have to carry the entire weight of HR compliance. Many employers use a contract + handbook approach, where:

• the contract sets the legal relationship and key terms
• the handbook includes policies and processes (sickness, disciplinary, social media, IT use, etc.)

This makes it easier to update processes as your team grows, while keeping the core contract stable.

Not Updating Contracts As Your Business Changes

As you grow, you might introduce:

• new working patterns
• new bonus or commission schemes
• remote work arrangements
• new systems and security requirements

If your contract doesn’t reflect reality, you’ll have gaps when you need clarity most.

Key Takeaways

• If you’re asking what should be included in an employment contract, start with the legally required employment particulars (pay, hours, holiday, notice, job role) and build in the clauses that protect your business.
• A strong contract should clearly set expectations around working hours, holiday (including bank holidays), sickness reporting, and termination notice.
• Employer-protection clauses like probation, confidentiality, IP ownership, and restrictive covenants can prevent major headaches when someone leaves or a dispute arises.
• Modern workplaces should also address training costs, acceptable use of systems, monitoring transparency, and data protection obligations.
• Generic templates and vague drafting can create uncertainty - and uncertainty is where disputes thrive.
• Getting your employment contracts right from day one is one of the simplest ways to protect your business as you grow.

If you’d like help drafting or reviewing your employment contracts, you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.