How to create a simple work contract

What is a contract of employment?

A contract of employment is an agreement between an employer and an employee that outlines the terms and conditions of the job. It explains what the employer expects from the employee and what the employee can expect in return.

In the UK, an employment contract does not always need to be written to exist, verbal agreements can still form a contract. However, according to the Employment Rights Act 1996, employers are legally required to provide employees with a ‘written statement’ from their first day of work.

A written contract helps ensure that both parties clearly understand:

• Job responsibilities
• Pay and working hours
• Benefits and entitlements
• Notice periods and policies
• Workplace rules and expectations

While the legal requirement focuses on providing key employment details, many businesses choose to provide a full employment contract because it offers clearer protection and reduces the risk of disputes.

Why employment contracts are important

Employment contracts do more than simply document the terms of a job. They provide a framework for the working relationship and protect both the employer and the employee.

Clarifies expectations

A written agreement ensures everyone understands the role, responsibilities, and expectations from the start. This can help prevent confusion about duties, working hours, or compensation.

Helps prevent disputes

Clear documentation of employment terms makes it easier to resolve misunderstandings if they arise. Without a contract, disagreements about pay, responsibilities, or notice periods can become difficult to manage.

Demonstrates professionalism

Providing a clear employment contract signals that your business operates professionally and values transparency with its staff.

Supports legal compliance

Employment contracts help ensure your business meets UK employment law requirements, particularly around working conditions, holiday entitlement, and pay.

Complements employer protections

While contracts help define working relationships, they are only one part of protecting your business. Many employers also carry Employers’ Liability Insurance, which covers compensation claims if an employee is injured or becomes ill because of their work.

Together, clear contracts and appropriate insurance can form a strong foundation for responsible employment practices.

Different types of workers and contracts

Not every worker is employed under the same type of contract. Understanding the different categories of workers can help ensure you choose the correct arrangement for your business.

Permanent employees

Permanent employees work for a business on an ongoing basis and may be either full-time or part-time.

These contracts usually include:

• Ongoing employment with no fixed end date
• Regular salary or wages
• Holiday entitlement and benefits
• Notice periods for ending employment

Permanent employment contracts are the most common form of agreement for long-term roles.

Fixed-term or short-term contracts

A fixed-term contract lasts for a specific period or until a particular project is completed.

These contracts are often used for:

• Seasonal roles
• Maternity leave cover
• Project-based work
• Temporary increases in workload

The contract should clearly state the start and end dates and explain what happens when the term finishes.

Zero-hours contracts

Zero-hours contracts allow employers to offer work only when it is available, without guaranteeing a minimum number of hours.

They are commonly used in industries with fluctuating demand, such as hospitality or retail. Workers still have rights, including holiday pay, but working hours can vary.

Contractors or freelancers

Contractors are typically self-employed individuals who provide services to your business.

Unlike employees, contractors:

• Manage their own tax and National Insurance
• Usually work under a service agreement rather than an employment contract
• May work for multiple clients

It’s important not to misclassify employees as contractors, as this can lead to legal and tax complications.

Agency workers

Agency workers are usually employed by a recruitment agency but carry out work for another business.

In this situation, the agency generally handles the employment contract, although the business still has certain responsibilities regarding working conditions and safety.

What must be included in a contract of employment

A good employment contract should cover all the key terms of the working relationship. Some of these details are legally required in the UK.

Typical elements include:

Employer and employee details

The contract should include the full legal names of both the employer and the employee.

Job title and duties

Clearly describe the employee’s role and responsibilities. This helps define expectations and avoids confusion later.

Start date

Include the official start date of employment and, if relevant, when continuous employment began.

Place of work

State where the employee will work. If the role involves multiple locations or remote work, this should also be mentioned.

Pay and payment schedule

Outline:

• Salary or hourly rate
• Payment frequency (weekly or monthly)
• Overtime arrangements if applicable

Working hours

Specify:

• Normal working hours
• Breaks
• Expectations around overtime or flexibility

Holiday entitlement

Employees in the UK are entitled to a minimum amount of paid holiday. The contract should explain:

• Annual leave allowance
• How leave is requested
• Any rules about holiday carryover

Sick leave and sick pay

Explain the company’s sick pay policy and whether statutory or enhanced sick pay applies.

Notice periods

Notice periods explain how much notice must be given when ending employment, whether by the employer or employee.

Disciplinary and grievance procedures

Your contract should reference workplace policies that explain how disciplinary matters and complaints are handled.

Probation period

Many employers include a probationary period during the first few months of employment, allowing both parties to assess whether the role is a good fit.

Additional clauses

Some businesses also include:

• Confidentiality agreements
• Intellectual property ownership
• Non-compete or non-solicitation clauses

These are not always necessary but can help protect sensitive business information.

How to create a simple employment contract

Creating a basic employment contract does not need to be complicated. By following a few simple steps, you can put together a clear and effective agreement.

Step 1: Gather employee information

Start by collecting the essential details about the employee and the role. This typically includes:

• Employee name
• Job title
• Start date
• Salary or hourly wage
• Working hours

These form the foundation of the contract.

Step 2: Define key terms of employment

Next, outline the key working conditions, including:

• Pay structure
• Holiday entitlement
• Notice periods
• Sick leave policy
• Location of work

Clear terms help ensure both parties understand how the employment relationship will operate.

Step 3: Add legal and policy references

Most businesses have workplace policies covering topics such as conduct, disciplinary procedures, and grievance processes.

Rather than repeating these in full, the contract can reference the relevant company policies.

Step 4: Check compliance with employment law

Before finalising the contract, review it to ensure it meets UK employment law requirements.

This includes providing all mandatory employment particulars and ensuring the terms do not conflict with legal minimum standards.

Many employers choose to use templates from reputable HR providers or consult an employment law specialist to ensure compliance.

Step 5: Provide the contract to the employee

Once complete, provide the contract to the employee before or on their first day of work.

Both parties should review the document carefully and confirm agreement, typically by signing it.

How contracts help protect employers

Employment contracts are an important part of responsible business management.

By clearly documenting employment terms, contracts can:

• Reduce misunderstandings about pay or responsibilities
• Provide written evidence if disputes arise
• Demonstrate fair employment practices
• Support compliance with employment regulations

However, documentation alone cannot protect against every risk associated with employing staff.

For example, if an employee becomes injured or develops a work-related illness, they may bring a claim against the employer. In the UK, most businesses that employ staff are legally required to hold Employers’ Liability Insurance, which helps cover compensation and legal costs associated with these claims.

While employment contracts help define expectations and workplace rules, Employers’ Liability Insurance provides financial protection if an employee suffers harm in connection with their work.

Together, contracts, good workplace policies, and appropriate insurance help create a safer and more secure working environment.

Common mistakes employers make with work contracts

Even well-intentioned employers sometimes make mistakes when drafting employment contracts. Some common issues include:

Using outdated templates

Employment law evolves over time, and contracts that were suitable several years ago may no longer meet current requirements.

Missing key terms

Failing to include essential details such as pay structure, working hours, or notice periods can lead to confusion later.

Misclassifying workers

Incorrectly categorising workers as contractors rather than employees can create legal and tax risks.

Not updating contracts

If an employee’s role, salary, or responsibilities change significantly, the contract should be updated to reflect those changes.

Providing contracts late

Employees should receive their written employment particulars from day one of employment.

When should you update an employment contract?

Employment contracts should not be treated as static documents.

You may need to review or update them when:

• An employee is promoted or changes role
• Pay or benefits are adjusted
• The workplace moves location
• Remote or hybrid working arrangements are introduced
• Employment law changes

Regularly reviewing contracts helps ensure they remain accurate and legally compliant.

Final thoughts

Creating a simple work contract is one of the most important steps you can take when hiring employees.

A well-written contract clearly defines the terms of employment, helping both employers and employees understand their rights and responsibilities. It also supports professional workplace practices and reduces the risk of disputes.

For employers, contracts are just one part of building a responsible employment framework. Many businesses also rely on safeguards such as Employers’ Liability Insurance, which helps protect against claims if an employee becomes ill or injured because of their work.

By combining clear employment contracts, fair workplace policies, and appropriate insurance coverage, employers can create a stronger and more secure foundation for managing their workforce.

Add Employers’ Liability Insurance to your business policy

As a small business, having Employers’ Liability insurance can be essential when you take on staff. It protects your business financially and legally if an employee is injured or becomes ill as a result of their work for you.

Accidents can happen even in workplaces with strong health and safety practices, and without proper coverage, you could face significant compensation costs, legal fees, and potential regulatory fines.

Protectivity provides Employers’ Liability Insurance as an add-on to a wide range of business insurance policies. You’ll also find Public Liability Insurance typically included as standard with specialist extras – legal expenses cover, professional indemnity and more.

Get your services covered and explore our business insurance policies online!

Sources:

https://www.acas.org.uk/employment-contracts-and-the-law

https://my.ucu.org.uk/app/answers/detail/a_id/37/~/penalties-for-breaching-employment-rights

*Disclaimer – This blog has been created as general information and should not be taken as advice. Make sure you have the correct level of insurance for your requirements and always review policy documentation. Information is factually accurate at the time of publishing but may have become out of date.