Contracts of employment


Contracts of employment are agreements between an employer and an employee which sets out their employment rights, responsibilities and duties.

Verbal and non-verbal contracts

A contract of employment is normally in writing. One of the reasons for putting a contract of employment in writing is that it can be used to resolve disputes between an employer and their employee over the terms of the employee's employment.

However, contracts can also be verbal - because you agreed to work for your employer and they agreed to pay you.

Contracts of employment do not have to be in writing - a contract exists from your agreement to work for your employer and your employer's agreement to pay you for your work. There is always a contract between an employee and employer.

However, you are entitled to a written statement of your main employment terms within two months of starting work, upon request.

Your rights in a contract of employment

Generally, you and your employer can agree to whatever terms you wish to be in the contract. However, you cannot agree to a contractual term which gives you fewer rights than you have under law. The rights that you have under a contract of employment are in addition to the rights you have under law, such as the right to a national minimum wage and the right to paid holidays.

You and your employer are bound to the employment contract until it ends (usually by giving notice) or until the terms are changed (usually in an agreement between you and your employer).

Breaches of employment contracts

A contract of employment is a legally binding agreement between you and your employer. A contract may be broken if either you or your employer does not follow a term in the contract. This may be so whether the term is express or implied. This is known as a breach of contract.

  • Breach by employees

Common breaches of employment contracts by employees are quitting without proper notice, or failing to perform work tasks.

If the employee breaches the employment contract it will depend upon the term breached and the nature of the breach as to whether the employer can terminate the employment contract. If the breach is not particularly serious, an employer may try to settle the matter with you informally. If an employer suffers a financial loss because of an employee's breach, they could make a claim for damages.

  • Breach by employers

Common breaches of employment contracts by employers include not paying wages, or changing an employee's job or terms of employment. Breaches of the implied term of "mutual trust and confidence" between the employee and the employer may include false allegations of misconduct, or harassment.

If your employer breaches the employment contract, there are different avenues for redress available to you depending upon the type of breach. It may be that the employee has the choice of accepting the breach or resigning. If the employee accepts the breach by the employer and remains in their job, the employee may still seek a form of compensation.

If you would like some advice about a breach of an employment contract you can speak to one of our specialist employment solicitors who will be able to help you with this.

Changes to employment contracts

Generally, neither the employer nor the employee to an employment contract can change the employment contract without each other's agreement (although some contracts allow the employer to make changes). Making changes without agreement is a breach of contract.

Changes to employment contracts can also be made by collective agreement - by negotiation between the employer and a trade union or staff association. The change may still apply to an employee even if they are not a member of the trade union or staff association.

Agreed changes don't necessarily have to be in writing. However, if they alter the terms in the 'written statement of employment particulars', the employer must provide another written statement showing what has changed within a month of the change.

Different types of contracts of employment

Employment contracts are often the subject of much negotiation between employer and employee. Employment contracts will contain a range of standard terms. Some of the standard terms that can be found in such contracts include terms on:

  • Salary
  • Hours worked
  • Length of notice
  • Length of employment

Express terms

The terms that are written into a contract of employment are called express terms. Breach of these express terms may entitle the other party to terminate the contract. Whether they are entitled to do this will depend on the seriousness of the breach of contract by the other party.

The type of express terms that go into a contract of employment will vary with the type of job the employee is being employed to do. For example:

  • If the employee is employed to do a job which involves them having access to confidential information, there is likely to be a confidentiality clause in the contract. This is to guard against the leaking of this sensitive and often valuable information
  • An employer may insist on having a restraint of trade clause. This clause would attempt to prohibit the employee from competing in the same business as their employer for a period of time after his contract of employment ended

Whether such clauses are enforceable would depend on the scope of the clause. Care should be taken when drafting such clauses as they may be deemed to be 'unreasonable' by a court and subsequently unenforceable against the ex-employee.

Indefinite employment contracts

These contracts are terminable by notice. In this type of employment contract, a notice clause should specify the notice period to be given by the employer if he wishes to terminate the employee’s contract.

This notice period must not be less than the statutory minimum period implied into the contract by law. In some cases the notice period stipulated in contracts is far greater than the statutory minimum. This is usually the case with senior employees as employers do not want to lose them at short notice.

Fixed-term contracts

Fixed term contracts are for a specific period of time, for example, six months. Once the fixed term comes to an end the employee’s contract of employment terminates.

Employers should be wary about granting employees long fixed-term contracts, as if an employer wants to end a long fixed-term contract prematurely, they will be liable to pay the employee compensation for breach of contract.

As an employer, it is vital to seek legal advice when drafting an employment contract, to ensure the agreement is not too vague or inclusive of unreasonable clauses. As an employee, a solicitor can help you interpret some of the terms of your agreement in the case of dispute. It is advised to contact an employment solicitor if you have any disputes surrounding your employment contract.

Are you in dispute over a term in your employment contract? Do you need to have an employment agreement drawn up? We can put you in touch with an employment law solicitor who is an expert in contract claims. Please call us on 0800 1777 162 or complete the web-form above.

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