An employment contract is a legally binding agreement between employer and employee. It sets out the terms and conditions of employment and ensures both parties have a clear understanding of what is expected during the employment relationship. Having clear, well-drafted contracts in place is a fundamental part of managing employment relationships effectively and minimising the risk of disputes arising.
When should contracts be issued and signed?
An employment contract does not need to be written and/or signed to exist. It can arise through a written or verbal agreement, or through the conduct of the parties.
However, employers have a statutory obligation to provide employees with a written statement of employment particulars on or before day one of employment. This must set out key terms such as pay, working hours and holiday entitlement. Issuing a properly drafted contract of employment is the most reliable way to meet this obligation and set clear expectations from the outset. Clear, written terms help to ensure consistency and provide an important level of protection for the business if a dispute arises or employment is terminated.
Employment contracts should be issued before employment begins, ideally alongside the offer letter. They should be signed as evidence that both parties have agreed to the terms and conditions of employment. A signed contract provides clarity and reduces the risk of disputes. However, the absence of a signature does not automatically make a contract unenforceable. In some cases, a contract may be implied through the parties’ actions and conduct, for example where an employee starts work, is paid in accordance with the contract and continues working on that basis after having a reasonable opportunity to review the terms.
When should contracts be updated?
As businesses evolve, roles change and economic conditions shift, employers may need to amend contractual terms. This is not simply an administrative exercise. Significant changes to contractual terms, such as amendments to pay, working hours or duties, will usually require consultation and agreement with the employee, unless the contract contains a carefully drafted flexibility or variation clause. Imposing unilateral changes can expose employers to breach of contract and constructive dismissal claims.
The most effective time to update the contract is at the point of the change and/or agreement. If contracts are not updated to reflect changes, employers may find they cannot rely on key provisions. If a change is minor, a variation letter may be sufficient, setting out the amended terms and confirming that all other terms remain unchanged. If significant changes are made, it is best practice to issue a new contract for signature.
An employment contract is more than a formal document. It is the framework that defines the legal and practical boundaries of the employment relationship. Clearly drafted contracts provide clarity on roles, responsibilities, and rights, and help avoid misunderstandings and disputes between the parties. Regular contract reviews also help employers maintain compliance, manage risk and ensure employment terms remain aligned with business needs and updated legislation.
If you need advice and assistance in drafting, reviewing or updating your employment contracts, please contact a member of our Employment Team.