Employment Status and Contracts
Discover crucial elements of contractual relationships and understand the importance of terms of employment when creating and varying contracts
Learn about the ‘contract of service’, the written statement of particulars, and varying the contractual terms
A contract of employment is a legally binding agreement between an employer and employee. In the UK, the term ‘employee’ is defined by the Employment Rights Act 1996 as an individual who has entered into or works under a contract of service or apprenticeship.
This factsheet focuses on the contract of service, rather than a contract for services which might apply to a subcontractor or freelance worker, and so it doesn’t deal with self-employment or workers in any detail. It provides introductory guidance on the types on contract, and examines the items included in the written statement of particulars and their legal context. It also provides advice on drafting or amending contracts and varying the contractual terms.
A contract of employment is a legally binding agreement between an employer and employee. In the UK, the term ‘employee’ is defined by the Employment Rights Act 1996 as an individual who has entered into or works under a contract of service or apprenticeship, and they are a mixture of ‘express’ and ‘implied’ terms.
Express terms are those which are actually stated in writing or given verbally. Written express terms are not restricted to written employment contracts but can include a number of the organisation’s other documents, such as a staff handbook, unless the provisions are deemed not to have contractual effect.
Before drafting express terms, employers need to be familiar with the relevant law, such as employee status, the rules governing written particulars, equal pay and the minimum wage, fixed-term and part-time work, flexible working, parental leave and working hours. The express terms must comply with any minimum legal standards such as the right to paid holidays and the right to daily and weekly rest breaks.
All employees and, from 6 April 2020, all workers too, have a statutory right to a written statement of particulars of employment setting out certain key employment terms on their first day of work.
Terms can also be implied into contracts. This may happen because the term is:
Examples of terms that are implied into a contract of employment include:
As many terms as possible should be clearly set out in writing and given to the new employee before or when they start the job. This will help to avoid uncertainty or a dispute between the employer and the employee about the terms.
Employers accessing UK government COVID-19 support schemes, including the Coronavirus Job Retention Scheme which applies until 31 March 2021, may need to agree changes to terms and conditions in writing with their employees (see the varying contracts section below).
Employers should provide written confirmation to employees of the altered working arrangements covering which hours the employee is now required to work under the scheme and those hours they will not be required to work. This written agreement must be made available to HMRC on request.
Find out more on what employers should be doing in our Responding to the coronavirus hub.
A contract of employment is in many respects no different from any other contract. As such, it's governed by contract law, which means that there needs to be:
However, because the employer is often the more powerful party in the arrangement, the law does require some extra aspects. Our Terms and conditions of employment Q&As for CIPD members have more detail on contractual matters.
A number of different working arrangements have evolved over the years, with more fluid and flexible models of work accelerating due to technological change. UK law currently recognises three main types of employment status:
An individual's employment rights depend upon whether they are an employee or worker. (The self-employed have very few employment rights).
A contract of employment only applies if there is an employee relationship, so this factsheet focuses on employees’ rights although some aspects apply to workers too.
Various tests are used to decide whether a person is an employee including:
Mutuality of obligation - does the employer have to provide work, and does the worker have to take the work that is offered?
Control - does the employer control how the worker does the work, and do the employer’s disciplinary procedures apply to the worker?
Integration - how far is the employee integrated into the employer’s organisation?
Multiple - looks at a number of factors including 'substitution' (that is, can the worker send another person to do work for the employer on their behalf?)
Employers must make the relationship clear at the outset, not least because employees have more rights in law than workers. Find out more on the difference between employees, workers and the self-employed in our factsheet on employment status. CIPD members can find more detail in our Employee status law Q&As.
There has been much public debate on the gig economy and zero-hours contracts. 'Zero-hours contract' is not a legal term, but means a contract involving an employee or a worker in which there is no set minimum number of hours.
The essential elements of the written statement of particulars of employment are set out in UK law. From 6 April 2020, both workers and employees are entitled to receive written particulars from day one of their contract. Previously this right only applied to employees and employers had two months in which to fulfil the obligation.
Some information must be included in one document while other information can be delivered separately.
Items to be included in the main document:
Items that can be provided in a supplementary statement:
Where there are no particulars to be entered under any of these headings, that fact should be stated, and all the above information should be given to the employee or worker.
While the Employment Rights Act 1996 states the items that must be included in the written statement of particulars, employers can refer to their employee handbookor other policies for precise details of issues such as:
The written statement may additionally contain other clauses that an employer wishes to rely on such as restrictive covenants or rules about company equipment. Where an offer letter or written contract sets out the main employment terms and conditions, this can count as the written statement.
From April 2020, the written statement of particulars must be provided on or before the first day of employment. Current workers can request a written statement including the additional information which is now required. Employers should comply with these requests within one month.
Varying existing contractual terms normally requires agreement.
Although some minor matters can be changed without the employee’s agreement, most aspects cannot: examples of things that can be changed include non-contractual policies where these have been carefully drafted to ensure there is no binding contractual effect.
Organisations should be cautious about trying to vary contractual terms. If changes are a fundamental breach of contract employees can resign and bring a tribunal claim.
Some employment contracts include an express term which states that a particular term is variable by the employer. Such clauses may encourage employees to assume that the changes are permissible, but even an express clause will not guarantee that the employer can significantly vary contractual terms to the employee’s detriment without agreement.
Employers who wish to alter existing contractual terms have three main options:
Agree the changes with the employee after thorough consultation. A small incentive may be offered to encourage acceptance. This is the safest course of action.
Make changes unilaterally. Even where there is a pressing business need to impose the changes, this may be risky. In some circumstances the employer may assume acceptance if the employee continues to work without objection. However, the employee may choose to continue to work, but do so under protest and bring an action for breach of contract. Alternatively, the employee may resign and bring a claim for constructive unfair dismissal and/or wrongful dismissal. See more on dismissal procedures.
Terminate the employee’s contract by notice and offer them re-engagement on new terms and conditions. An employer may consider this option where changes cannot be agreed and where it appears too risky to impose the changes unilaterally. The employer must then offer re-engagement on the new terms immediately. Employers should be aware that in legal terms this may be considered a redundancy dismissal, so they should follow any rules around collective redundancy and consultation time limits. This course of action is not without risk: the employee may claim breach of contract or unfair dismissal, although any compensation will be limited as the employer is offering re-engagement. See more on redundancy.
Any variations should be confirmed in writing within one month of the changes taking place.
Changes following a transfer of undertakings can only be made for a economic, technical or organisational reason if connected to the transfer, not merely to harmonise terms across the workforce.
While there is no legal requirement for employees to sign their written statement, it makes it easier for an employer to rely on any clauses if they've done so.
Where employers wish clauses to be non-contractual, they should state this clearly when inserting them to ensure they cannot be relied on as implied by custom and practice.
Certain clauses such as mobility clauses or restrictive covenants need to be drawn up with particular care to ensure they can be relied on in the future.
Employees’ requests to change their terms and conditions must at least be considered, especially for employees who have worked for the same employer for at least 26 weeks as the flexible working legislation requires this.
There may be an increased focus on employers’ attempts to vary existing contractual terms as they try to carry on trading following the coronavirus related impact on business.
Acas - Templates for written terms of employment
GOV.UK - Contract types and employer responsibilities
HOWARD, G. (2017) Drafting employment contracts. 3rd ed. London: Law Society.
INCOMES DATA SERVICES. (2014) Contracts of employment. Employment law handbooks. London: IDS.
BRADY, M. and BRIODY, A. (2916/7) Strategic use of temporary employment contracts as real options. Journal of General Management. Vol 42, No 2, Winter. pp31-55.
KEARSEY, E. (2019) Top employment contract mistakes. People Management (online). 2 August.
MADDOCKS, R. (2018) Time to spring clean your employment contracts. People Management (online). 18 April.
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Members and People Management subscribers can see articles on the People Management website.
This factsheet was last updated by Lisa Ayling solicitor and employment law specialist, and by Rachel Suff.
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