Employment contracts: an employee guide

If you understand the terms and conditions of your contract of employment, you’ll be better able to stand up for your rights at work and to carry out your responsibilities as an employee. 

In this guide, we outline the different kinds of employment contract and what should be included in them. We also consider the ways in which your employer can break or ‘breach’ your contract and what you can do about it.

See also our separate guide on ‘Can your employer change your contract?

What is a contract of employment?

Put simply, a contract of employment is a voluntary agreement (verbal or written) for you as an employee to work and for your employer to pay you for your work. An employment contract exists if you’re employed, whether it’s in writing or not.

Is a written contract of employment essential when you’re doing paid work?

A written contract doesn’t have to exist for there to be a valid employment contract between you and your employer. What’s more, your employer is not legally obliged to provide you with a written contract (but see below).  

Having said that, a written contract is highly desirable, so as to ensure there’s no misunderstanding about your job role and the terms and conditions of your employment. It can help avoid future disputes between you and your employer and also be invaluable in helping to settle any disputes.

Is a written contract the same as a statement of employment particulars? 

A written employment contract is not the same thing as a ‘written statement of employment particulars’, which your employer is legally obliged to give you within two months of your starting employment. (See this gov.uk page for more details.)

The written statement is usually shorter than a full contract and includes your starting date, job description, pay, hours of work and any disciplinary or grievance procedures your employer has. These terms and conditions become part of your employment contract.

What kinds of employment contracts are there?

The most common types of employment contracts are::

Permanent contracts

A permanent contract is for employees who work full or part-time and receive either a salary or hourly rate. The contract only ends when the employee or employer terminates it. An employee with this type of contract is entitled to all relevant statutory employment rights.

Temporary or fixed-term contracts

When a role is not expected to become permanent it is referred to as a temporary, or fixed-term position.  In most cases, contracts for such roles include an end date. After 12 weeks, an individual on a temporary contract will usually have the same rights as someone who is permanently employed to do the same job.  (See this TotalJobs article for further detail.)

Freelance contracts 

A freelance contract is an agreement drawn up to hire an external worker (also known as a freelancer or contractor) for a particular project or period of time.

A freelance contract occurs when the employer is not under any obligation to offer work to the worker. Similarly, the worker is not obliged to accept work offered to them by their employer. This means no fixed or regular hours are worked. Either the worker or employer can terminate the agreement at any time.

Zero-hours contracts 

Under a zero-hours contract, an individual typically undertakes to carry out work for an employer, although the employer does not have to guarantee how much work or when work will be offered. The person doing the work is only paid for the hours they actually work. 

All zero-hours workers have access to at least some of the benefits enjoyed by traditional employees, such as holiday pay, the national minimum wage and protection against discrimination. For more detail see this gov.uk article.

What should be in a written contract of employment?

A written employment contract details the rights and responsibilities of both your employer and you as the employee. A permanent contract typically includes the following:

  • Employer’s details: Their name and address and your employment location if it’s different from the employer’s main address
  • Your details as an employee: Your name, job title and responsibilities
  • Employment dates: The date your employment starts (and ends, if it’s temporary)
  • Salary/wage: Your rate of pay, whether it is a full-time or part-time salary (a fixed payment) or an hourly wage (variable, depending on the hours worked and/or performance) and how frequently you will be paid (eg weekly or monthly)
  • Working hours: The number of working hours associated with your role (usually weekly) and whether these hours can be worked flexibly or are fixed to specified times each day. Also whether the hours will be the same each day/week, or be likely to vary. (see our guide on flexible working for further details)
  • Notice period: As a minimum, the contract should state the notice period that has to be given to you or by you and whether that’s the statutory minimum or your employer’s scheme if it’s more generous. (See our guide on notice periods.)
  • Holiday and sick pay: Your annual holiday entitlement (including when it starts and ends) and sick pay arrangements, whether statutory or based on a company scheme.
  • Any restrictive covenants or ‘non-compete’ clauses: Any restrictions that prevent you from competing with your employer or contacting their clients/customers for a specified period of time after you have left their employment
  • Any ‘non-disclosure’ or ‘gagging’ clauses: These are designed to stop you from disclosing sensitive information to a new employer or other third parties.
  • Any additional benefits: These include financial benefits such as bonuses and non-financial benefits such as life insurance, private health insurance, gym membership

 

You should review your contract of employment carefully before you accept it, and take particular note of clauses such as restrictive covenants which will affect what you can do in your next employment.

Can your employer change your contract?

Your employer can make changes to your contract so long as you agree to them voluntarily.  The changes and your agreement to them should always be made in writing. If you are not sure about the proposals, we recommend that you seek legal advice before agreeing to anything. 

There are also some situations where an employer can change some of the terms of your contract, including by way of a ‘flexibility clause’ in your contract. See our separate guide on changing your contract 

What are some common examples of breach of contract by employers?

If your employer has breached your employment contract it means they have failed to act in the ways they promised to act, as set out in your contract. Common examples include:

Changes to your working hours or times 

Where your employer changes your working hours, your start and/or finish times or makes any other similar alterations without your agreement.

Unlawful deductions from your wages

Where your employer asks you to take a pay cut or reduces your pay without your agreement.

Wrongful dismissal 

Wrongful dismissal is when your contract of employment is terminated by your employer, without giving you the notice required by your contract. (See our guide on wrongful dismissal for more detail)

Not paying for contractual entitlements

Your employer may be in breach of contract if they have failed to pay you for such things as travel expenses or holiday pay but your contract says you are entitled to it.

Are some breaches of employment contracts more serious than others?

Some breaches of contract are regarded as more serious than others. The two main types are:

Minor or ‘non-material’ breach of contract

A minor (or ‘non-material’) breach is when part of an employment contract has been breached, but not seriously enough to entirely undermine the contract. 

An example is where your employer pays your outstanding travel expenses later than stated in your contract. Such minor breaches can be and are usually resolved informally. However, if they keep recurring, then you might want to make a formal complaint or ‘raise a grievance’ in the first instance (and see below).

Serious or ‘material’ breach of contract

This more serious kind of breach occurs when an employer fails to honour an important part of your employment contract. For example, if they reduced your pay, or failed to pay you a payment due. 

Such a breach might be serious enough to justify you resigning and claiming constructive dismissal on the grounds that you had the right to assume that your employer had ended your contract. 

If you breach the terms of your contract, what can your employer do?

What your employer can do if you breach the terms of your contract depends on the severity of the breach. Ideally, your employer should try to resolve the issue with you informally. 

However, a more serious breach by you might result in disciplinary action being taken against you or even dismissal. Your employer also has the right to sue you if you significantly breach your contract although in practice This doesn’t happen very often, 

What can you do if your employer breaches your contract?

Double-check your contract and if you believe your employer has breached it, there are several actions you could take which include:

Resolving your employer’s breach of contract informally 

If it’s not a serious breach and you want to stay employed, then you could try to resolve it by informal discussions with your employer.

Raising a grievance about the breach 

If the breach is more serious and if informal approaches don’t work, then you may wish to raise a grievance about the issue.

Negotiating an exit package with compensation

If you decide that you want to leave your employment because of a serious breach, you could try to negotiate a settlement agreement that would include financial compensation. 

Making an employment tribunal claim 

If negotiations don’t succeed and you get dismissed as a result, you could make an employment tribunal claim for breach of contract and/or unfair dismissal, depending on the circumstances

The maximum claim you can make at an employment tribunal for breach of contract is £25,000. For anything above this, or in a case that doesn’t involve you being dismissed, you would have to make a civil court claim (see below).

Claiming for breach of contract at a county or high court

Some employees would do better to make a civil claim to a county or high court. Here there are higher claim limits than in the employment tribunal as well as longer time limits for making your claim (up to 6 years). Breaches that don’t involve dismissal can also be heard at these courts.

Claims of up to £50,000 can be heard in the county court and anything in excess of that will be heard in the high court. 

We strongly recommend that you consult a qualified employment lawyer before deciding to take a breach of contract claim to either a county or high court.

 

Next steps

At Monaco Solicitors, we can check over your new contract to ensure there are no clauses that adversely or unduly restrict you, either when you start your new job or in the future. 

We can also help you to negotiate compensation terms and a settlement agreement with your employer if they have breached your employment contract.

If your employers won’t negotiate a settlement, we offer legal support for any related claim you want to make to an employment tribunal or civil court.

If you would like a no-obligation consultation, contact us today via this link, phone 020 7717 5259, or email [email protected]

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