Employment Contracts explained

UK Employment Contracts: What International Employers Must Know

If you are hiring your first employee in the United Kingdom, one of the first things you will need to get right is the employment contract. It is the document that sets out the relationship between you and your worker, and in the UK, it carries legal weight from the moment someone accepts your job offer, even if nothing has been written down.

That might sound straightforward, but the UK has specific rules about what must be included, when it must be provided, and which employment laws apply. For international employers, particularly those without a UK legal entity, getting this wrong can lead to disputes, tribunal claims, and penalties from HMRC.

This guide covers what UK employment contracts must contain, the different types available, and how an Employer of Record can handle the contract process on your behalf.

What is an employment contract in the UK?

An employment contract in the UK is a legally binding agreement between an employer and an employee. It sets out the terms and conditions of employment, including pay, working hours, holiday entitlement, and notice periods.

Here is the part that catches some international employers off guard: a contract does not have to be in writing to be valid. Under the Employment Rights Act 1996, a contract exists as soon as someone accepts a job offer, whether that acceptance is verbal, written, or implied through conduct. If you tell someone they have the job and they start working, you have a contract.

That said, UK law does require employers to provide a written statement of certain terms. More on that below.

Is an employment contract legally required in the UK?

The contract itself is not something you choose to create. It exists automatically when employment begins. What the law requires is that you provide a written statement of the main terms.

Since April 2020, this written statement (often called the "principal statement") must be given to the employee on or before their first day of work. It covers the essentials: job title, pay, hours, holiday entitlement, and notice periods.

There is also a "wider written statement" that includes additional details such as pension arrangements, collective agreements, and training provisions. This must be provided within two months of the employment start date.

If you fail to provide the written statement, an employment tribunal can award the employee two to four weeks' pay in compensation. It is a relatively small penalty in isolation, but it often signals wider compliance gaps that can lead to bigger problems.

What types of employment contracts exist in the UK?

Not every hire needs the same kind of contract. UK employment law recognises several types, and choosing the right one depends on the nature of the role.

Permanent contracts are the most common. They have no end date and provide the employee with full statutory rights from day one (or from the qualifying periods set out in the Employment Rights Act 1996). These can be full-time or part-time.

Fixed-term contracts run for a specified period or until a particular project is completed. After two years of continuous service on successive fixed-term contracts, the employee is treated as permanent unless the employer can justify the fixed term.

Zero-hours contracts do not guarantee a minimum number of hours. They are legal in the UK, but they have attracted significant political and regulatory scrutiny. The Employment Rights Act 2025 introduces new restrictions on zero-hours arrangements, including a right to a guaranteed-hours contract after a qualifying period.

Worker contracts apply to people who are not full employees but are not genuinely self-employed either. Workers have some employment rights (such as holiday pay and the national minimum wage) but not others (such as unfair dismissal protection). The distinction matters, because getting it wrong can lead to claims under IR35 or the Equality Act 2010.

Choosing the wrong contract type is one of the most common mistakes international employers make in the UK. If you engage someone on a zero-hours contract when the reality of the working relationship looks like permanent employment, a tribunal can reclassify them. If you hire a contractor when the role is clearly an employee role, you face IR35 penalties. The contract must reflect the genuine nature of the working relationship, not just what is most convenient for the employer.

What must a UK employment contract include?

The principal statement must cover the following, and it must be provided on or before the first day of work:

• The employer's name and the employee's name
• The job title or a brief description of the work
• The start date and, if applicable, the end date
• The rate of pay and how often it is paid
• Working hours and days
• Holiday entitlement (including public holidays)
• The place of work
• Details of any probationary period
• Notice periods for both sides
• Information about collective agreements, if applicable

The wider statement, due within two months, adds:

• Pension arrangements
• Details of any training the employee is required to complete
• Disciplinary and grievance procedures
• Any terms relating to the employee's right to work outside the UK

Beyond the written terms, UK employment contracts also include "implied terms." These are not written down but are understood to exist. Examples include the duty of mutual trust and confidence, the employer's duty to provide a safe working environment, and the employee's duty not to disclose confidential information.

Key UK employment laws that affect contracts

Several pieces of legislation shape what goes into a UK employment contract and how it is enforced.

The Employment Rights Act 1996 is the foundation. It sets out the right to a written statement, unfair dismissal protections, redundancy pay, and notice periods. It is the Act that most employment tribunal claims are brought under.

The Equality Act 2010 prohibits discrimination on the basis of nine protected characteristics, including age, disability, race, sex, and religion. Every employment contract must be consistent with this Act, and any term that discriminates is unenforceable.

The Working Time Regulations 1998 cap the working week at 48 hours (unless the employee opts out in writing), guarantee rest breaks, and set minimum holiday entitlement at 5.6 weeks per year (28 days for a full-time employee, including bank holidays).

The National Minimum Wage Act 1998 sets the floor for pay. As of April 2026, the national living wage for workers aged 21 and over is £12.71 per hour. Different rates apply to younger workers and apprentices.

The Health and Safety at Work Act 1974 requires employers to ensure, so far as is reasonably practicable, the health, safety, and welfare of their employees. This is an implied term in every contract, regardless of whether it is written down.

Restrictive covenants in UK employment contracts

Many UK employers include restrictive covenants (also called restrictive clauses) in their contracts to protect their business after an employee leaves. The most common types are:

Non-compete clauses prevent a former employee from working for a competitor for a set period. In the UK, these are only enforceable if they are reasonable in scope, duration, and geography. A clause that prevents someone from working anywhere in the industry for two years is unlikely to survive a tribunal challenge.

Non-solicitation clauses prevent a former employee from approaching your clients or staff. These tend to be more enforceable than non-competes, provided they are specific about who cannot be approached and for how long.

Confidentiality clauses protect proprietary information and trade secrets. These are generally enforceable, particularly if the information genuinely qualifies as confidential.

The key principle is that restrictive covenants must protect a legitimate business interest. If they are too broad or too long, a tribunal will strike them out.

For international employers, it is worth noting that the UK government has proposed limiting non-compete clauses to three months. While this has not yet become law, it is worth keeping in mind when drafting contracts. A well-drafted restrictive covenant should be specific enough to protect your business without being so broad that it prevents the employee from earning a living.

How does an EOR handle UK employment contracts?

If you are hiring in the UK without a legal entity, an Employer of Record takes on the role of legal employer. That means the EOR issues the employment contract, not your company.

The contract the EOR creates will comply with UK employment law, including the Employment Rights Act 1996, the Equality Act 2010, and the Working Time Regulations 1998. It will include the principal statement, the wider written statement, and any industry-specific terms that apply.

Your company still controls the day-to-day relationship with the employee. You decide what work they do, how their performance is managed, and what projects they work on. The EOR handles the legal and administrative side: payroll, tax, benefits, and compliance.

This arrangement is particularly useful for international employers who want to hire in the UK without setting up a subsidiary. It removes the need to understand every nuance of UK employment law while still ensuring the contract is legally sound.

The EOR also handles changes to the contract during employment. If you want to give the employee a pay rise, change their working hours, or update their job title, the EOR processes the variation and ensures it is documented correctly. In the UK, any change to a contract term must be agreed by both the employer and the employee. Unilateral changes can lead to breach of contract claims, so having a specialist manage this process reduces the risk of disputes.

Terminating a UK employment contract

Ending employment in the UK is not as simple as in some other countries. The UK does not have "at-will" employment. An employer must have a fair reason for dismissal and follow a fair process.

The statutory minimum notice periods are:

• One week if the employee has been employed for between one month and two years
• One week for each complete year of service, up to a maximum of 12 weeks after two years' service

Contractual notice periods can be longer than the statutory minimum, and many employers do set longer periods for senior roles.

Fair reasons for dismissal include capability, conduct, redundancy, statutory restriction, and "some other substantial reason." If an employer dismisses someone without a fair reason, or without following a fair process, the employee can bring a claim for unfair dismissal to an employment tribunal.

The Employment Rights Act 2025 is changing the landscape here too. From January 2027, the qualifying period for unfair dismissal claims will be reduced from two years to six months, and the compensation cap will be removed. For international employers, this makes getting the contract right from the start even more important.

Redundancy is another area where the contract matters. If you are making someone redundant, you must follow a fair process, which includes consulting with the employee, considering alternatives to redundancy, and applying fair selection criteria. Employees with at least two years' service are entitled to statutory redundancy pay, calculated based on their age, length of service, and weekly pay (capped at £719 per week for the 2025/26 tax year).