If you're taking on your first employee, writing a contract can feel like one more complicated thing on an already long list. It doesn't have to be.

A contract of employment doesn't need to be long or written in legal language. It just needs to cover the right things. This guide tells you exactly what that means.

Why contracts matter

A contract of employment sets out the terms of the working relationship between you and your employee. It protects both of you.

For you, it's clarity. If a dispute arises about pay, hours, holiday or anything else, the contract is your first point of reference. For your employee, it's security. They know what they're signing up for.

You're legally required to give employees a written statement of their main terms and conditions on or before their first day. A full contract of employment goes further and is better protection for both sides.

The difference between a written statement and a full contract

A written statement of particulars is the legal minimum. It sets out the key terms of employment and must be given to all employees from day one.

A full contract of employment includes everything in the written statement, plus additional clauses that give you more protection — things like confidentiality, notice periods, restrictive covenants and what happens if things go wrong.

For most small businesses, a straightforward contract that covers both is the right approach.

What to include in a contract of employment

The following must be included by law:

• The names of the employer and employee
• The start date
• Job title and a brief description of the role
• Place of work
• Pay: how much, how often and how it will be paid
• Working hours, including any expectations around overtime
• Holiday entitlement, including how it's calculated and when it can be taken
• Sick pay arrangements
• Notice period on both sides
• Pension arrangements
• Whether the role is permanent or fixed-term

Beyond the legal minimum, it's worth including:

• Probationary period, if you have one, and what it means in practice
• Confidentiality obligations
• What happens to any work the employee creates — who owns it
• Any restrictions on working for competitors after leaving
• Disciplinary and grievance procedures, or a reference to where they can be found

A note on restrictive covenants

Restrictive covenants are clauses that limit what an employee can do after they leave. Common ones include not poaching clients, not setting up a competing business or not approaching former colleagues for a set period.

They're only enforceable if they're reasonable. That means they need to be proportionate in scope and duration. Blanket restrictions that go on for years or cover enormous geographic areas are unlikely to hold up.

If you want these in your contract, it's worth getting a solicitor to help you draft them properly.

How to write it in plain English

You don't need legal language. In fact, plain English is better. It means both sides actually understand what they've agreed to.

A few tips:

• Use short sentences and simple words
• Say 'you' and 'we' rather than 'the employee' and 'the employer'
• If you need to use a technical term, explain it
• Break it into clearly labelled sections so it's easy to navigate

If you're starting from scratch, the ACAS website has free contract templates you can adapt. GOV.UK also has guidance on what the law requires.

When to issue the contract

You must give employees their written statement of particulars on or before their first day. Getting the full contract signed before they start is better practice. It means everything is agreed before work begins.

Send it with enough time for them to read it properly and ask questions. Don't hand it over on their first morning and expect a signature before lunch.

What to do if terms change

You can't change the terms of a contract without the employee's agreement. If you want to change something, you need to discuss it with them, explain why and get their written consent.

Making changes without agreement can amount to a breach of contract, which can give the employee grounds to make a claim against you.

If you're making a change that affects a lot of employees, take advice before you proceed.

Contracts for different types of worker

Part-time employees

Part-time employees have the same rights as full-time employees, pro-rated for their hours. Their contract should reflect their actual hours and any flexibility around when those are worked.

Fixed-term employees

Fixed-term contracts should state the end date or the event that will bring the contract to an end. Fixed-term employees have the same rights as permanent employees.

Zero-hours workers

Zero-hours contracts don't guarantee any minimum hours. They're commonly used in hospitality, retail and care. Workers on zero-hours contracts still have employment rights, including the right to be paid the National Minimum Wage and to accrue holiday.

Zero-hours contracts have had a lot of scrutiny in recent years and the law around them is changing. Check the current position on GOV.UK before using one.