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Contract of employment UK

Each country has its own rules and standards when it comes to employment contracts. And employers need to understand the complexities of UK contracts of employment before they can hire there. In this guide, we’ll take you through everything you need to know to understand the different types of employment contracts in the UK, the terms you need to include in a standard employment contract, and how to manage fixed-term contracts and extensions.

Employment contracts and policies

In the UK, a contract of employment is an agreement between an employee and an employer, which sets out the employment conditions, rights, responsibilities, and duties of the employer. These are called the terms of the contract, and both the employer and the employee have to stick to them until either the contract ends, or they agree to change the terms. 

All employees have an employment contract with their employer, regardless of whether they have signed a written agreement. A contract is in place as soon as an employee accepts a job offer. 

Written statement of employment particulars

While there isn’t a legal requirement to provide a written contract of employment in the UK, employers do have to give their employees a ‘written statement of employment particulars’ when they start work. This is a document that explains the main conditions of the employment agreement. 

The written statement of particulars is in two parts: 

  • The principle statement: This is the main document, which employers must deliver to employees on their first day of work.
  • A longer written statement: This contains more details about the employment particulars that apply. It must be delivered within two months of the employee’s start date.

Company policy vs. employment contract vs. employee handbook

A company might have policies in place that explain how they would like employees to conduct themselves at work. For example, many companies have policies on things like workplace bullying, health and safety and absence and sick leave. They may also create an employee handbook to help employees understand these policies and how they affect them.

In the UK, whether or not a company handbook or policy counts as part of the terms of an employee’s contract depends largely on how it’s written. If it’s made clear that the rules being described are contractual obligations, they become part of the employee’s contract terms, which means they are legally binding. However, if this is not made clear, then they are not contractual obligations. If an employee breaks a non-contractual policy, employers can only handle it through disciplinary action, not legal action.

Terms of a contract UK

The ‘terms’ of a contract of employment in the UK are the parts that are legally binding. Employers in the UK are free to set their own contract terms, but they can’t offer worse employment conditions than those required by law. For example, all employees in the UK have the right to 5.6 weeks’ paid leave each year. An employer could choose to offer more leave than this by including it in the employee’s contract, but they can’t offer less.

The terms of a contract in the UK might be written down in a physical document that’s signed by the employer and the employee, but they don’t have to be. The terms of a contract might also be:

  • Agreed verbally between the employer and the employee
  • Written in a company handbook or on a staff noticeboard
  • Written in the offer letter from the employer
  • Included in collective agreements

It’s the employer’s responsibility to clarify which parts of the contract are legally binding, however they are communicated. For example, an employee handbook may contain guidance on how certain company policies should be implemented. However, unless it is clearly stated that the policy is a contractual obligation, it shouldn’t be treated as such.

Contract terms that are required by UK law

Contract terms might also be required by law. For example, UK employment laws state that an employee can’t be paid less than the National Minimum Wage. The employer’s obligation to pay this amount is part of the terms of the contract, even if it’s not written down.

Implied terms

There may also be implied terms, which are not clearly agreed on between the employer and the employee, but which are nonetheless part of the contract of employment in the UK. This might include things like:

  • The employer providing a safe work environment
  • The employee not stealing from their employer
  • Things that are necessary for the job, like a driver having a valid driving licence
  • Legal requirements like the right to minimum wage or 5.6 weeks paid annual leave
  • Things that are expected because they have been done at the company for a long time

Understanding collective agreements

Collective agreements are agreements between employers and representatives of trade unions or staff associations. These agreements allow employee representatives to negotiate with employers for better working conditions. Terms agreed through collective bargaining become part of an employee’s employment contract terms, which means the employer is legally required to stick to them.

Fixed-term contracts in the UK

In the UK, fixed-term contracts are usually employment contracts that include a specific end date. Alternatively, they may end when the employee has completed the particular task they were hired for. Examples of employees who might be given a fixed-term contract in the UK include:

  • Someone covering for another employee’s maternity leave
  • Someone hired to meet a temporary peak in demand
  • Someone hired for seasonal or casual work
  • Someone hired to complete a specific task, like installing a computer system

Employment rights for employees with fixed-term contracts

In the UK, fixed-term employees have many of the same rights as permanent employees. For example, they are entitled to:

  • The same pay and conditions as permanent employees
  • The same (or equivalent) benefits as permanent employees

Employers must also provide fixed-term employees with information about any permanent vacancies that arise within the organisation so that they can apply for a permanent role if they want to. Once they have worked for the same employer for two years or more, fixed-term employees have the same redundancy rights as permanent employees.

Right to equally favourable treatment

In general, employees on fixed-term contracts in the UK have the right to be treated as favourably as permanent employees who perform the same or similar duties. This right is set out in the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002.

The exception to this is when an employer can show there is a good business reason for treating two employees differently. For example, an employee on a fixed-term contract may not be given a company car even though permanent employees in the same role have one. This might be permissible if the employer can show that it would be too expensive to offer this benefit to an employee on a short-term contract.

Can an employee leave a fixed-term contract in the UK?

Yes, employees can end a fixed-term contract early if they want to. If the employee has worked for their employer for a month or longer, they have to give notice of at least one week.

Can an employer end a fixed-term contract early?

Whether or not an employer can end a fixed-term contract before the end date depends on what the contract says. If the contract provides for the employer to end it early, they can do so as long as they provide the proper notice as stipulated in the contract. On the other hand, if the contract doesn’t include provisions for early termination, the employer might be in breach of contract. If the employee has worked for the employer for two years or more, they may be able to claim for unfair dismissal.

Contract extensions

Employers in the UK usually use fixed-term contracts to hire employees for a limited period. For example, you might hire an employee for one year to cover another employee’s maternity leave. Or you might hire someone on a fixed-term contract to install a new computer system. 

However, there are times when both the employer and the employee want to continue working together after the contract ends. At that point, you can choose to extend or renew the employee’s contract. 

What is a contract extension in the UK?

If you only need the employee to continue working for a short time after the end date of their contract, you may not need to renew the contract. For example, if you hired an employee on a six-month fixed-term contract but the work they were hired for took seven months, you may not need to formally renew the contract. In this situation, the employee is still covered by the contract, as there is an ‘implied agreement’ that the end date has changed. 

If you want the employee to continue working for a more significant period, it’s a good idea to renew their contract. There is no specific limit on how many times a fixed-term contract can be renewed in the UK. However, if a worker is employed on successive fixed-term contracts for four years or more, they are automatically granted the same rights as a permanent employee. 

What happens if you don’t renew or extend a fixed-term contract?

Fixed-term contracts normally come to an end automatically once the end date is reached or the agreed project is completed. Employers don’t have to give notice to end the contract. 

However, not renewing an employee’s contract is considered a dismissal in UK employment law. If the employee has worked for you for more than two years, you need to show that you have a fair reason for not renewing the contract, or they could make a claim for unfair dismissal. Fair reasons for dismissing an employee in this way include: 

  • Problems with their capability to do the job
  • Problems with their conduct at work
  • Redundancy (i.e. the job is no longer needed)
  • Contravention of a statutory obligation
  • Some other substantial reason (SOSR)

An example of ‘some other substantial reason’ that an employer could give for not renewing an employee’s contract would be the worker they were temporarily replacing returning to work, for example after maternity leave.

Redundancy for fixed-term employees

Once a fixed-term employee has worked for an employer for two years or more, they have the same redundancy rights as permanent employees. That means employers have to find the employee suitable alternative employment within the business if possible. They also have to pay the employee statutory redundancy pay and ensure that the redundancy process is fair. There are special rules for companies making 20 or more employees redundant within a 90-day period.

Hours of work UK

In the UK, the standard working week for a full-time employee is 40 hours, which are usually worked over five days of eight hours each. The standard hours of work for office workers are usually between 8 am and 6 pm, Monday to Friday. Average working hours in the UK 

The latest data from the Office for National Statistics (ONS) shows that the average working hours actually worked per week for full-time employees is 36.6 hours. Many people in the UK work part-time hours, which means the average across all employees is much lower. 

Maximum working hours in the UK

In the UK, the maximum working hours that an employee can work is usually 48 hours per week. This is calculated on average over a 17-week period. That means that employees may work more than the maximum number of hours in some weeks, as long as the average comes out to less than 48 hours. 

Employees over the age of 18 can choose to opt out of the maximum UK working hours, which means they can work more than 48 hours per week on average. As an employer, you can ask your employees to opt out, but you can’t dismiss them or treat them differently if they refuse. Certain workers, including airline staff, workers on ships or boats and some security guards, can’t opt out of the 48-hour maximum. 

Exceptions to the rules on maximum working hours in the UK

There are some jobs where working more than 48 hours per week on average is deemed necessary. These workers are exempt from the rules on the maximum UK working hours. They include: 

  • Roles where 24-hour staffing is required
  • Roles in the armed forces, police, or emergency services
  • Security and surveillance roles
  • Work as a domestic servant in a private home
  • Seafarers, sea fishermen or other workers on vessels

In some roles, the 48-hour rule still applies, but it’s calculated over a different reference period. For example, the average is worked out over a 26-week period for trainee doctors, and a 52-week (one-year) period for workers in the offshore oil and gas industry. 

Legal working hours for young people

Young people in the UK can’t start full-time work until they reach school leaving age, which is different in England, Scotland and Wales. Once they have reached this age, people under the age of 18 can work a maximum of 40 hours per week, or eight hours a day. There are also specific rules about rest breaks that must be granted to workers under 18 years of age.

Remote work in the UK

As in many other countries around the world, remote work has become much more common in the UK over the last few years. Today, many UK employees work remotely some or all of the time. Employers don’t have to allow their employees to work remotely, but it can be a valuable benefit. 

Flexible working requests

In the UK, all employees have the right to request flexible working arrangements, and their employer has to properly consider and respond to their request. Before 2024, employees had to have worked for their employer for 26 weeks to make a flexible working request. However, a change to the law in 2024 means that employees now have this right from day one of employment. Flexible working requests might include requesting flexibility on:

  • The number of hours they work
  • The time they start and finish working
  • Which days they work
  • Where they work (e.g. remote working)

When an employee makes a flexible work request, their employer has to deal with the request in a reasonable manner. That means they need to properly assess the advantages and disadvantages of granting the request. 

They might also offer alternatives to the request if it’s not possible to grant it. For example, if an employee asked to work 100% remotely but the employer determined that they needed to be on-site to complete some tasks, they could offer them a hybrid work arrangement where they work remotely part of the time. 

If the employer rejects the request, they have to offer an appeal process. Employers have two months to respond to a flexible work request. If they approve the request, they must adjust the employee’s contract and start the new arrangement within 28 days. 

Remote working policies for UK companies

Many companies in the UK now have a remote work policy that defines when and where they expect their employees to work. Although this is not a legal requirement, it’s best practice because it shows employers and potential candidates what they can expect from you as an employer. 

When putting together a remote working policy, UK employers should think about the potential positive and negative impacts of allowing employees to work remotely. For example, some employers believe that remote work reduces productivity (although others disagree). On the other hand, offering the option to work remotely can be an important benefit for attracting talent.

Tailored employment contracts in 100+ countries

Like all countries, the UK has its own rules and regulations when it comes to employment contracts — and non-compliance could land your company in hot water.

Thankfully, our team is experienced in drawing up tailored, compliant contracts in the UK (and more than 100 countries worldwide). That means that, when you work with us, you won’t need to waste time worrying about whether you’ve got it right. Instead, you can focus on what matters: your business.

Compliantly hire workers anywhere with CXC

With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.

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