What Must Be Included in an Employment Contract

When you hire someone, a contract of employment is the starting point for the working relationship.  It lays out the basics like pay, hours, holiday entitlement and notice periods, but it’s also where expectations on both sides are clearly recorded. Done well, it not only ensures compliance with the law but also protects your business interests. Done poorly, it can expose you to disputes and costly claims.

What employers must include in a contract of employment?

Under the Employment Rights Act 1996, certain terms must be set out in writing for every employee from day one. This includes the job title and description, place of work, working hours, holiday entitlement, pay and benefits, notice periods and any probationary period. Employers must also detail any collective agreements that apply, as well as statutory rights such as sick pay. Failure to include these elements can put you in breach of your legal obligations before the relationship has even begun.

How senior executive contracts differ from standard agreements

Senior roles, particularly at the director level, often involve a different set of considerations. Their contracts typically go beyond the statutory minimum to cover:

• Bonus structures – clearly defining performance targets and how bonuses are calculated
• Post-termination restrictions – preventing a departing executive from competing with your business or soliciting clients for a defined period
• Share options and equity arrangements – setting out the conditions for acquisition, vesting and sale
• Confidentiality provisions – ensuring sensitive commercial information is safeguarded even after the individual leaves

A well-drafted Directors’ Service Agreement should balance the need to protect the business with fair and transparent terms for the individual, reducing the risk of disputes if the relationship changes or ends.

Keeping employment contracts up to date with legislation

Employment law evolves and contracts must reflect these changes. The upcoming Employment Rights Bill, for example, will introduce new protections and entitlements which may require employers to revisit their standard terms. Failure to do so could mean your contracts fall out of compliance and expose you to claims.

We have previously covered the impact of remote work on employment contracts and policies in more detail, looking at how to address working location, expenses and accountability while respecting legal limits. With flexible working requests becoming more common and with new rights in this area, contracts must be updated to reflect these arrangements clearly.

How mlplaw supports businesses with employment contracts

Our Employment team works closely with employers to create contracts that meet legal requirements, protect commercial interests and reflect the realities of your business. Our services in this area include:

• Preparing bespoke Employment Contracts and Directors’ Service Agreements that ensure you meet your legal obligations
• Designing tailored clauses to protect your business, including confidentiality restrictions and post-termination restrictions
• Drafting bonus and remuneration schemes for senior employees

We also offer regular contract reviews, so whether you are hiring a new employee or updating a senior manager’s contract, having clear and compliant documentation makes the process straightforward.