Contract of Employment
Understanding how to write a contract of employment is an essential first step for a business or private individual when hiring a permanent employee or hiring a temporary employee.
However, as there is a lot of legalese and detail in a contract of employment, it can be easy to get lost and miss out key details. To help you create a thorough and complete contract for your employees, we’ve put together a checklist.
Below, we will break down the necessary components of an employment contract and share the most common variations. By following these guidelines, you can create your own contract of employment template that will be adaptable to any position you wish to fill.
Once you have the basics down on paper, you should still work with a specialist contract lawyer to iron out the details and ensure your contract follows the law!
What is a contract of employment?
A contract of employment is a legal agreement between an employer and employee that must be completed before the employee starts their role. It lays out the specific expectations of each party in the relationship. These include:
- The start date and length of employment (usually indefinite if permanent)
- Duties and responsibilities
- Salary and bonuses
- Employee rights (holidays, sick pay, benefits)
- Termination clause (length of notice required)
- Company policies
Some parts of an employment contract will be dictated by the employment laws of the country where the business is registered, such as minimum wage and workers’ rights. The rest of the details will be up to the business to decide.
Of course, the details will differ for each role, but they may also differ due to the type of contract a business is offering to a prospective employee. Let’s look in-depth at each type of employment contract.
Type of employment contract
Most of the time, the majority of an employer’s workforce will be on permanent contracts, but there are variations that can make the details of a contract quite different. The most common contracts are:
Permanent contract (full-time or part-time)
Permanent members of staff are employed on an ongoing, indefinite basis. They enjoy full employee rights, such as a minimum wage salary (or higher), paid annual leave, and an agreed notice period in the case of termination of the contract.
Unlike a permanent contract, FTCs have a specific end date. These contracts are often used for project work, or for hiring freelance specialists. FTC employees will be paid a monthly salary and enjoy the same status as permanent staff in most respects, but may not be eligible for the full range of employee benefits.
Like a fixed-term contract, but with minor differences. Temporary employees will be paid by the week, on an hourly rate, and this will typically be done via their recruitment agency. It’s also typical for temps to have no notice period for termination of their contract.
How to write a contract of employment
An employment contract is broken up into sections covering each aspect of the employer-employee relationship. The sections include details of the role, start date, salary and bonuses, benefits, termination, and company policies.
Within these sections are further specifics. These are numbered to help readers navigate the document easily.
Next, we’ll examine each section in more detail.
Example contract of employment
Every legally acceptable contract of employment template will include the same basic components. The typical layout will be as follows:
Parties and definitions
Before getting into the details of the job, you must first state the legal names of the parties involved (company or individual), and explain what certain phrases used throughout the contract mean. For example: “the board” means the Board of Directors of the Company.
This section details the basics of the job for which someone has been employed. These include the job title, start date, end date (if applicable), hours of work, duties, and responsibilities.
Salary and bonuses
All details relating to payments to the employee including salary, frequency of payment, tax and pension deductions, expenses policy, bonus policy, and criteria for salary increase.
The number of days per year that an employee is entitled to take off as paid holiday. This will also include any rules around how often an employee can take holidays, and for how long at any one time.
Sickness and sickness pay
Rules around employee entitlement to sick pay.
Pension and other benefits
Details of the company pension policy, as well as additional employee benefits like remote working, company away days, training and more.
Details on the required notice period that an employee must give before terminating the contract, and vice versa. This section will also explain any behaviour or actions by the employee that would give the employer grounds to immediately terminate the contract.
Any broader company policies that apply to all employees. For example, confidentiality, intellectual property, equal opportunities, and data protection.
Basic employment contract
The simplest break down of a basic contract of employment will include details of the following:
- Start date and duration of employment
- Job title
- Job duties
- Holiday entitlement
- Sick pay
- Termination clause
- General company policy
Temporary contract of employment
Temporary employees (also known as agency workers) will usually have signed a contract with a recruitment agency, and will also be paid by them, rather than having a direct relationship with the business at which they’re working.
However, if they wish to, a business can create a temporary employment contract themselves. These will include all the same sections as a permanent contract but will differ in several ways.
Typically, a temp will have a defined end date to their contract, their salary will be calculated per hour, and paid weekly. In the UK, temp employees’ rights are protected by Agency Workers Regulations (AWR). This gives them rights to a business’ on-site facilities such as canteens and childcare, and further rights like pension contributions and annual leave after a 12-week period of continuous employment.
As a leading temp recruitment agency, Tiger has its own temporary contracts and payroll system set up, meaning that if you are looking to recruit a temp employee, but are unable to payroll them, we can do so for you.
Looking to recruit
Once you have a contract of employment template prepared, you’re ready to start the search for the perfect employee to sign on the dotted line.
Whether you’re looking to hire permanent staff or temps, we’re here to help. Get in touch with your requirements today.