What is an Employment Contract?

You are here: Home » News & Articles » What is an Employment Contract?

by Rebecca Lister | 30th Oct 2025

Why a Missing Contract Could Cost You More Than You Think

Article Summary

What is an employment contract? It’s a legally required agreement between employer and employee that outlines the essential terms of employment – from salary and hours to duties and rights. Failing to provide one can lead to legal claims, fines, and costly disputes. This guide explains what must be included, why it matters, and how to stay compliant under UK employment law. If you’re hiring or updating contracts, don’t leave it to chance – get expert HR support to protect your business.

Need help creating compliant, professional contracts? Our expert HR consultants can craft or review your employment contracts to protect your business and your people. Get in touch today for an initial consultation.

The Legal Foundations of Employment Contracts

By law, employers have to provide employees with a written statement of particulars, commonly known as an employment contract. This is a legally binding agreement between the employer and employee setting out the contract terms and conditions of employment.

Employment contracts form the foundation of the working relationship between employer and employee, detailing key terms to ensure clarity and legal compliance. In addition to the statutory requirements, employers often include extra provisions to reflect company-specific policies and practices.

The written statement is made of two parts:

1. The main document (which is also referred to as a principal statement)
2. A wider written statement

This structure ensures that the most critical employment terms are clearly outlined upfront, while additional details covering broader employment policies and procedures are provided separately to maintain clarity and avoid overwhelming the employee with information all at once.

Employees must have been given their principal statement by their first day of employment, with the wider statement needing to be provided within the first two months from this start date.

Employment contracts must include certain information by law, or the employer could face an award against them for breach of contract, made by the employment tribunal, to pay an employee.

Failing to issue a compliant employment contract can expose your business to legal claims, fines, and reputational damage. Without clear terms in writing, disputes over pay, responsibilities, or dismissal can escalate quickly – and tribunals often rule in favour of the employee when no formal agreement exists. It’s not just a legal formality – it’s a critical risk management tool.

What to Include in The Principal Statement

Whether you are an SME or a larger organisation, it’s essential to understand your legal responsibilities when hiring staff. By law, employers should look to include the following in their written/principal statement of particulars:

• The employer’s name and address
• The employee’s or worker’s name and address
• Job title and job description detailing work to be undertaken
• Start date and date of continuous employment, if applicable
• Rate of remuneration/salary and how/when this will be paid
• Working hours, including days that must be worked and how hours or days can change
• Holiday entitlement, including an explanation of how this is calculated if the employee or worker leaves
• Where (places or addresses) where an employee or worker will be working
• The length of the probation period and any conditions that apply, including notice requirements during this time and criteria for successful completion.
• The amount of sick leave and pay; and any other paid leave (if these details are not included in this document, you must state where to find it)
• How long is the job is expected to last and any end date, if this is a fixed-term contract
• How long is any probationary period and whether there are any conditions
• Any contractual or non-contractual benefits
• Obligatory training that the employee or worker will have to complete and whether this is paid or unpaid
• The notice period both employee/worker and employer must give when employment ends
• Any information about working abroad, if applicable

The principal statement can also specify arrangements for flexible working, probation extension policies, and reimbursement procedures for business-related expenses. Information on professional development opportunities and criteria for promotions may also be detailed to support career progression.

What Should the Wider Written Contract Include?

Employers must also provide employees or workers with the following information:

• Information about pension and workplace pension schemes
• Any information about collective agreements
• Any other rights to non-compulsory training provided by the employer
• Information about disciplinary and grievance procedures

In addition to the above, employers may also choose to include details on voluntary benefits such as employee assistance programs, access to wellness and wellbeing resources, or company-specific perks like staff discounts and travel allowances. Including this information can enhance employee engagement and provide a clearer picture of the full range of support available.

Clear guidelines on how to access these additional resources and who to contact for assistance should also be outlined to ensure employees can make the most of these offerings. This added transparency fosters a positive working environment and reinforces the employer’s commitment to staff welfare.

Variations and Amendments to Employment Contracts

Employment contracts, and all other effective HR policies, need to be updated over time due to changes in business needs, legal requirements, or employee roles. Employers should communicate any proposed amendments clearly and, where necessary, consult with employees to gain their agreement.

Key examples of amendments may include changes to working hours, job responsibilities, or salary adjustments. It’s important to document these changes formally and provide updated written statements to reflect the new terms.

Failure to handle contract variations properly can lead to disputes or claims of unfair treatment. Ensuring transparency and fairness in this process helps maintain trust and prevent misunderstandings.

“As an experienced HR professional with extensive knowledge in Education HR, The Stour Academy Trust engages with Veronica Fox through Eclipse HR on high level matters. Veronica is able to share a wealth of experience and realistic practical knowledge and strategies to support our HR needs alongside being personable!

As a Trust we pride ourselves on thinking outside the box which Veronica is more than willing to embrace and often suggests innovative people strategies.
Put simply, the support we receive from Veronica is well received and always with the best interest of us the client in mind.”

Tommy Cullen, Chief Operating Officer, The Stour Academy Trust

How Can We Help?

Still unsure what an employment contract is or how to draft one correctly? Our HR experts can help you create compliant, customised agreements for your team. Whether providing you with employment contracts, employment policies, employee handbook templates, or reviewing the documents you currently have in place.

Our expert HR consultants have years of experience in dealing with such matters across a variety of different sectors and keep up to date on any forthcoming employment law changes that may affect your obligations as an employer.

If you do require any support or guidance or wish to discuss what is an employment contract further, get in touch today and protect your business with confidence.

Author: Rebecca Lister
Rebecca supports the Eclipse HR team and our clients across a range of tasks. Rebecca has recently completed her Master’s degree in Advanced Legal Practice (MLaw) at the University of Kent and is now studying for her Solicitors Qualification Exams. Her academic focus, particularly in employment law, complements her practical experience and deepens her understanding of HR in action.

Disclaimer: Information and reference materials included within Eclipse HR Limited articles and blogs are provided free of charge and for reference purposes only.  They are not intended as a substitute for legal advice, or professional or other advice in regards to specific circumstances.  Whilst every effort is made to ensure the contents are correct on website publication, they should be considered for guidance purposes only.