Checklist: Identifying, reviewing and updating the terms of an employment contract (UK)

Introduction

This checklist provides in-house counsel, private practitioners and human resources (HR) professionals with guidance in relation to employment contracts. It covers the law in England, Wales and Scotland, but does not apply to Northern Ireland, where employment law is devolved to the Northern Ireland assembly.

The checklist can be used by employers when carrying out a review of employment terms, either with a view to updating written employment contracts or when tailoring a template employment contract. It can also be used by employers who are seeking an understanding of the terms of employment that are in existence within their workplace.

This checklist addresses the following steps:

1. Ensure compliance with the requirements of section 1 of the Employment Rights Act 1996
2. Consider sources of express terms of employment
3. Consider whether employment contracts are fit for purpose
4. Have an awareness of implied terms and conditions of employment

This checklist can be used in conjunction with How-to guide: Overview of employment law, Checklist: Drafting a staff handbook and How-to draft: Employment agreement with template clauses (Global). 

Employers should be aware that the Employment Rights Bill 2024, introduced on 10 October 2024, aims to significantly enhance worker protections in the UK. Key provisions include granting day-one rights for unfair dismissal, paternity, parental, and bereavement leave, changes to sick pay and flexible working rights, protections against zero-hours contracts and restrictions on the use of ‘fire and rehire’ practices. New legislation will be introduced throughout 2025 and 2026. Further information can be found at UK Parliament: Employment rights bill and Employment Rights Bill: factsheets.

Step 1 – Ensure compliance with the requirements of section 1 of the Employment Rights Act 1996

Step 2 – Consider sources of express terms of employment

Step 3 – Consider whether employment contracts are fit for purpose

Step 4 – Have an awareness of implied terms of employment

Explanatory notes

There are a variety of sources of contractual terms in employment relationships. Some are obvious, such as those recorded in a written employment contract; however, others may not be. It is vital for employers to understand what each party’s contractual obligations are, for the following reasons:

• ensuring that the employer has complied with its legal obligation to provide a written statement of terms and conditions of employment, as required by section 1 of the Employment Rights Act 1996 (ERA 1996);
• ensuring that both parties understand and comply with their day-to-day obligations in the relationship;
• ensuring that the employer avoids breaching an express or implied term of employment, which could result in legal action from a member of staff; and
• ensuring that the employer has appropriate written contracts of employment in place.

A contract of employment and its terms may be written or verbal, express or implied. A failure to properly understand and document terms of employment can expose employers to risks including staff members claiming the employer is in breach of contract and either:

• ending the contract and suing the employer for breach of contract; or
• refusing to follow what the employer believes is the contract term and suing the employer for breach of contract.

A breach of contract claim can include a claim for damages as well as the staff member seeking an injunction against the employer to prevent a breach of contract in the future.

This checklist will help employers to:-

• identify the terms of employment; and
• ensure that appropriate written contracts of employment are in place.

For employers who are drafting employment contracts from scratch, a template contract of employment is usually a good starting place. Free basic templates are available from the Advisory, Conciliation and Arbitration Service (Acas) website; however, any free template will need to be tailored to suit the employer and the employee’s role. Many law firms and HR professionals are able to provide template employment contracts for a fee. This checklist can be used in conjunction with a template employment contract, including How-to draft: Employment agreement with template clauses (Global), which is intended to be used as a starting point by employers seeking to implement consistent employment agreements across multiple jurisdictions.

Step 1 – Ensure compliance with the requirements of section 1 of the Employment Rights Act 1996

The first step for any employer carrying out a review of employment terms should be to identify the ‘written statement of terms and conditions of employment’ for each worker, as required by section 1 of the ERA 1996.

For workers starting employment after 6 April 2020, the ERA 1996 requires employers to provide employees and workers (collectively referred to as workers) with a written statement of their terms and conditions of employment. This statement, also known as a ‘section 1 statement’ or a ‘statement of particulars’ is a legal requirement. Prior to 6 April 2020, employers were only required to provide employees (and not workers) with these written statements. For a guide as to the difference between employees, workers and the genuinely self employed, see How-to guide: Overview of employment law.

Although workers employed prior to 6 April 2020 do not have the same entitlements under section 1 as employees do, they are entitled to request a section 1 statement. Employers must comply with such requests within one month.

Employers should note that the information required by section 1, ERA 1996 does not have to be provided in a document titled a ‘written statement of terms’. Employers often include the required information in an employment contract / employment agreement / contract of employment / terms and conditions of employment, etc –the terminology used varies.

If a review identifies that there is no section 1 statement in place for any worker(s), or that the legal requirements of section 1 are not fully met, this must be addressed without delay.

Agency workers who meet the definition of a worker will also be entitled to a section 1 statement, although this may well be from the employment business that provides their services (ie, the employment agency). They will also be entitled to a ‘Key information document’ detailing their employment in accordance with the Conduct of Employment Agencies an Employment Businesses Regulations 2003 (as amended).

Certain classes of worker are excluded from the right to a section 1 statement (ie, members of the armed forces, merchant seamen and seawoman).

1.1. Check the section 1 statement is up to date.

If a worker’s terms and conditions of employment have been amended since the issue of a section 1 statement, the employer has a legal obligation to provide the worker with a written statement of the changes. The formal requirements for this statement are the same as those for the initial section 1 statement. The statement must be provided to the worker within one month of the changes taking effect.

The written statement of the changes must include:

• the date on which the changes take effect;
• a description of the changes; and
• the reasons for the changes if they are not obvious.

If changes are made to the information required in the original section 1 statement, then the employer must issue a new statement that incorporates the changes and includes all the information required by section 1, ERA 1996.

1.2 Check the contents of the section 1 statement

Having identified the section 1 statement, the next step for employers is to make sure it complies with the law. Any section 1 statement issued after 6 April 2020 must include certain minimum information and, unless the information falls within the scope of step 1.2.4 below, must be provided before the commencement of employment.

The requirements of section 1 are complex, with different categories of information being required within different timescales. However, providing the requirements of section 1 are met, employers have freedom to decide exactly how to present and group the required information. Some employers choose to include all of the section 1 information in a single contract of employment that is provided to employees on or before day 1 of employment (often with other additional provisions not legally required – see step 3 below). Other employers include only the ‘day 1’ information in a contract of employment, with other information provided within supplemental documents. The government website suggests that employers provide the section 1 information in two parts – a ‘Principal Statement’ covering all the information required at the beginning of employment (see step 1.2.1 below), and a wider written statement within two months of the start of employment.

1.2.1 Information that must be provided in a single document, no later than the beginning of the employment

The following information must be contained within a single document:

• name of employer;
• name of worker;
• date employment started;
• date when continuous employment began;
• scale or rate of remuneration or method of calculating remuneration;
• intervals at which remuneration is paid;
• terms and conditions relating to hours of work, including those relating to normal working hours, days of the week the worker is required to work, and whether those hours or days can be varied, and if so, how;
• terms relating to holidays, including public holidays and holiday pay;
• terms and conditions relating to any other benefits provided by the employer that are not already covered in the section 1 statement;
• title of the job which the worker is employed to do or a brief description of the work for which they are employed;
• where the employment is not intended to be permanent, the period for which it is expected to continue or, if it is for a fixed term, the date when it is due to end;
• any probationary period, including any conditions and its duration;
• the place of work or, where the worker is required or permitted to work at various places, an indication of that and the address of the employer;
• where the worker is required to work outside the UK for a period of more than one month, details of the working arrangements;
• any training which the employer will fund and requires the worker to complete; and
• any other training which the employer requires the worker to complete and which the employer will not bear the cost of.

1.2.2 Information that must be provided by the date of commencement of employment, but can be provided in a reasonably accessible document

Section 1, ERA 1996 also sets out the following additional information that must be provided on commencement of employment, either within the contract of employment or within other reasonably accessible documents (eg, a staff handbook):

• terms and conditions relating to incapacity for work due to sickness or injury, including any provision for sick pay.
• terms and conditions relating to any other paid leave.

1.2.3 Information that must be provided on commencement of employment, but can be provided by reference to the law or a reasonably accessible collective agreement

Section 1, ERA 1996 requires employers to provide details of the length of notice which the worker is obliged to give and entitled to receive to terminate the employment. This can either be set out in writing or can be provided by reference to the law or a collective agreement. For example, ‘We may end your employment at any time by giving you [notice period in weeks] or the statutory notice you’re entitled to, whichever is longer.’ This must be included in the same document as the information set out at step 1.2.1.

1.2.4 Information that can be provided in instalments and, in any event, no later than two months after the commencement of employment

Some information can be provided in instalments and must be provided within two months of the commencement of employment, namely:

• terms and conditions relating to pensions and pensions schemes;
• any collective agreements which directly affect the terms and conditions of the employment including, where the employer is not a party, the persons by whom they were made;
• any training entitlement provided by the employer;
• a note specifying any disciplinary rules applicable to the worker;
• a note specifying any procedure applicable to the taking of disciplinary decisions relating to the worker or to a decision to dismiss the worker;
• a note specifying (by description or otherwise) a person to whom the worker can apply to if dissatisfied with any disciplinary decision relating to them or any decision to dismiss them and the manner in which any such application should be made;
• a note specifying (by description or otherwise) a person to whom the worker can apply to for the purpose of seeking redress for any grievance relating to their employment and the manner in which any such application should be made; and
• where there are further steps consequent on any such disciplinary appeal or grievance, a note explaining those steps.

Step 2 – Consider sources of express terms of employment

Employers should be aware that the way in which terms of employment are documented varies widely across different employers, sectors and industries. In some cases, employers may have a written contract of employment for each employee which sets out all terms of employment. In other cases, particularly in older and unionised workplaces, terms of employment can be found in a range of different documents, and it is possible to have written contracts of employment that do not include all terms of employment, but are supplemented by other documents.

2.1 Check for collective agreements

If the workforce is unionised (ie, there are recognised trade union(s)) any collective agreements between the employer and the trade union can introduce terms into the contractual relationship between the worker and employer. A trade union that is ‘recognised’ by an employer has the authority to negotiate with the employer in relation to pay and other terms of employment on behalf of a group of workers, known as the ‘bargaining unit’. This process is known as ‘collective bargaining’ and leads to the production of collective agreements, which supplement the terms and conditions of employment of the workers in the relevant bargaining unit.

2.2 Consider the impact of any employee transfers

If the workforce includes employees who have transferred from other employers as a result of successful tenders for contracts, or as part of an acquisition, then those employees will have terms and conditions of employment that differ from those who have always been the employer’s employees. Those incoming employees’ terms and conditions are protected under the Transfer of Undertakings (Protection of Employment) Regulations 2006. Ideally, any transferring employees will have clear written employment contracts; however, employers should be aware of the different ways in which they may have gained contractual employment rights, as set out in this checklist.

​​​​​​​2.3 Consider any other relevant documents

It is possible for terms of employment to be found in other documents that do not form part of the written contract of employment or any collective agreement, such as an employment policy or staff handbook. This can occur due to a deliberate decision by the employer, for example, when the employer decides to include certain contractual information within one section of a staff handbook. It is also possible for an employer to inadvertently give contractual effect to a document that is intended as a non-contractual policy, for example, by setting out a clear employee benefit or right and failing to note that it is non-contractual, discretionary and can be amended or withdrawn by the employer at any time.

For further information on staff handbooks and employment policies, see Checklist: Drafting a staff handbook.

Step 3 – Consider whether written employment contracts are fit for purpose

As well as ensuring compliance with the legal requirements under section 1, ERA 1996 and checking other sources of written terms, a review of employment contracts should include consideration of whether written employment contracts are fit for purpose, including:

• whether any other contractual terms comply with the employer’s statutory obligations; and
• whether any additional contractual terms would benefit the employer’s business. It is common for employers to have more detailed contracts of employment for more senior employees, with more basic contracts (sometimes just covering the requirements of a section 1 statement) for less senior roles.

3.1 Ensure statutory obligations are met

Workers have various statutory rights, for example, the right to be paid the national minimum wage (National Minimum Wage Act 1998 (NMWA 1998)) and the right to paid annual leave and specified rest breaks (Working Time Regulations 1998 (WTR 1998)). Employees also have additional statutory entitlements that are not available to workers.

Employers should ensure that any terms of employment provide workers or employees with at least their mimumum statutory entitlement. For example, an employment contract might be compliant with section 1, ERA in that it properly sets out the scale or rate of remuneration or method of calculating remuneration, but if the rate of remuneration is below the applicable mimumum wage, the employer will have failed to comply with its obligations under the NMWA 1998.

For further information about statutory employment rights, see How-to guide: Overview of employment law.

3.2 Consider additional terms

Additional contractual terms that are often found in contracts of employment include:

• a non-disclosure or confidentiality agreement: while there is an implied duty of confidentiality (see step 4 below), employers often include a more comprehensive express term in contracts of employment that prohibits the employee from sharing confidential information about the employer, its clients or its products;
• a non-compete clause: a provision that prevents the employee from working for a competitor for a certain period of time after leaving the employer’s employment;
• a non-solicitation clause: a provision that prevents the employee approaching customers of the employer for a certain period of time after leaving the employer’s employment;
• a non-poaching clause: a provision that prevents the employee approaching other members of staff of the employer for a certain period of time after leaving the employer’s employment;
• an intellectual property agreement: an agreement that specifies that any intellectual property created by the employee during their employment belongs to the employer;
• an exclusivity clause (often referred to as a whole time and attention clause): a term that prevents the employee from working elsewhere, which is often caveated by the possibility of the employer providing written permission;
• contractual benefits: in some situations (usually involving senior employees) certain benefits, such as a company car, bonus or pension contribution levels will be included as contractual terms;
• a garden leave clause and pay in lieu of notice clause: these provisions give employers control over whether the employee works a notice period and what the employee does during the notice period;
• obligations on termination of employment: these provisions deal with the return of employer property on termination;
• a data protection and employee monitoring clause: a provision setting out how the employer will use the employee’s personal data and how the employee might be monitored when at work;
• compliance with any key policies: a provision requiring the employee to comply with any key policies such as anti-bribery; and
• boilerplate clauses: these might include an entire agreement clause and a jurisdiction clause.

The terms listed above may not be applicable to every role or every employer, and the specific terms included in an employment contract will depend on the nature of the job and the employer's policies.

Step 4 – Have an awareness of implied terms of employment

Implied terms are not specified or set out, and generally must be so obvious that both parties would expect to be covered by them. Usually, implied terms arise from custom and practice, but terms can also be implied where the term is necessary for the business efficacy of the contract or from the parties conduct. The most common implied terms are as follows.

4.1 Obligations on the employee

• Fidelity: the obligation on an employee to offer faithful service to their employer (eg, they should not benefit from undisclosed profits they make from their employer’s work).
• Obedience: the employee is obliged to follow lawful and reasonable instructions from their employer.
• Trust and confidence: breach of this obligation by the employee may entitle the employer to dismiss.
• Confidentiality: while all contracts have such clauses implied, it is always best to have an express written clause covering such obligations due to the limited nature of an implied term of confidentiality.
• Due care and attention: the employee must perform their obligations with reasonable care. If particular loss can be shown arising from the employee’s breach, then the employee can be liable for those losses. This can also result in the employee having a duty to indemnify the employer for any claims the employer incurs under the principle of vicarious liability.

4.2 Obligations on the employer

• Health and safety: the employer must take reasonable steps to ensure the health and safety of employees.
• Redress for grievances: the employers must provide redress for grievances within a reasonable time.
• Provide work: the employer must provide work for the employee to undertake.
• Reasonable grounds to suspend an employee: the employer must be satisfied it has reasonable grounds for the suspension.
• Trust and confidence: any breach of this is considered so serious that an employee can resign and claim that they were constructively dismissed.

Over time, and with the requirement to provide section 1 statements, the scope and range of implied terms has reduced.

4.3 Incorporated terms

Such terms do not require an agreement by the individual employee. The most common term is the ‘equality clause’ incorporated into every contract of employment by Chapter 3, Equality Act 2010, that requires every man and woman to be paid the same.

Additional resources

Related Lexology Pro content

How-to guides:

Overview of employment law
How to carry out a fair termination of employment
Overview of workplace discrimination and harassment law
How to avoid disability discrimination in the workplace
How to comply with the duty to make reasonable adjustments in the workplace
How to carry out a fair dismissal on the grounds of SOSR

Checklists:

Drafting a staff handbook
Employment law considerations during a recruitment process
Determining the difference between an employee, a worker and an independent contractor
Carrying out a disciplinary process
Carrying out a capability process
Conducting a redundancy exercise
Managing multi-jurisdictional redundancies in Europe
Employment, immigration and tax considerations when dealing with cross-border working
Carrying out a TUPE transfer
An employer’s guide to fire and rehire

Quick views:

Protected characteristics under the Equality Act 2010
Key players in collective labour law – UK, Germany, Italy, France and the Netherlands
Collective redundancy consultation

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