Employment Contracts in the UK: What to Look Out For

An employment contract is more than just paperwork. It sets out the terms of the working relationship between an employer and employee, making it one of the most important documents you will ever sign in your career. Whether you are starting your first job, moving to a senior position, or hiring staff for your business, understanding how UK employment contracts work is essential.

This guide explains the key features of employment contracts in the UK, the clauses to pay close attention to, common red flags, and when to seek legal advice. We also look at real-life examples to show how these contracts affect everyday workers in Manchester, London and across the country.

What Is an Employment Contract in the UK?

An employment contract is a legally binding agreement that sets out the rights and responsibilities of both employer and employee.

It can be:

• Written the clearest and most common form
• Verbal agreed in conversation, though harder to prove
• Implied based on workplace practices (e.g., standard working hours)

Under the Employment Rights Act 1996, employers must provide a written statement of key terms within two months of a new employee starting. This should include:

• Salary or hourly rate
• Normal working hours
• Holiday entitlement
• Job title or description
• Notice periods

Importantly, statutory rights apply whether or not they are written in the contract. These include:

• National Minimum Wage
• Paid annual leave
• Protection from discrimination
• Right to redundancy pay (after qualifying period)
• Limits on working hours under the Working Time Regulations 1998

Example: Even if a bar worker in Manchester’s Northern Quarter signs a contract that says “no holiday entitlement,” the law still guarantees them 5.6 weeks of paid annual leave.

Types of Employment Contracts in the UK

Employment contracts are not all the same. The type of contract affects your level of job security, your rights, and how disputes may be resolved.

Permanent Employment Contracts

These are open-ended agreements with no fixed end date. Employees enjoy the full range of rights and usually have strong protections against unfair dismissal once they’ve worked continuously for two years.

Example: A nurse working at Manchester NHS Trust will almost always be on a permanent contract, with clear notice periods and entitlements.

Fixed-Term Contracts

These run for a specific length of time or until a project finishes. Employees on fixed-term contracts generally have the same rights as permanent staff. However, if the contract is repeatedly renewed, it may automatically convert into a permanent one.

Example: A software developer in London may be hired for a 12 month fixed-term contract to work on a digital transformation project. If renewed several times, they may gain permanent status.

Zero-Hours Contracts

Zero-hours contracts provide flexibility but also uncertainty. Employers don’t have to guarantee shifts, and workers don’t have to accept work.

While controversial, they remain lawful. Workers are still entitled to national minimum wage, paid holidays, and rest breaks.

Example: A hospitality worker on a zero-hours contract may only get shifts during busy weekends, but they are still entitled to paid annual leave based on average hours worked.

Freelance and Consultancy Agreements

Self-employed consultants and freelancers usually operate under service agreements rather than employment contracts. While attractive for flexibility, there’s a risk of misclassification.

If someone is treated like an employee told when to work, required to follow company rules, or reliant on one client they may actually be entitled to employee rights.

Example: A marketing consultant working exclusively for one England firm, attending daily staff meetings, may be classed as an employee in reality.

Key Clauses to Check Before Signing

Even contracts of the same type can contain very different clauses. These details matter, as they affect pay, working conditions, and future career options.

Pay, Benefits, and Bonuses

Your contract should state your basic pay, how often you’ll be paid, and details of any overtime rates, allowances, or pension contributions.

Watch out for vague “discretionary” bonus clauses. If bonuses are not guaranteed, employers may withhold them even when performance targets are met.

Working Hours, Overtime, and Breaks

The contract should specify normal working hours. The Working Time Regulations 1998 limit average weekly hours to 48 unless you sign an opt-out. Employees must also receive rest breaks and 5.6 weeks’ holiday each year.

Example: A call centre worker whose contract says “hours as required” could be at risk of being asked to work unreasonable shifts. This should be clarified.

Probation Periods

Probationary clauses usually last three to six months. During this time, employers can dismiss more easily, and notice periods are shorter.

Check what happens when probation ends: does pay increase? Does holiday entitlement change?

Notice Periods

Contracts must state how much notice each party must give. The statutory minimum is one week per year of service (up to 12 weeks), but contracts often require longer for senior roles.

Ensure notice is reciprocal. Some employers set longer notice for employees but shorter for themselves.

Restrictive Covenants

These are clauses limiting what you can do after leaving the job. They include:

• Non-compete clauses stopping you from joining a rival business
• Non-solicitation clauses preventing you from approaching former clients
• Confidentiality clauses protecting sensitive company data

Courts only enforce these if they are reasonable in scope, duration, and geography.

Termination and Dismissal

Your contract may list circumstances for dismissal. These must not undermine statutory rights, such as unfair dismissal protection after two years’ service.

Check whether the contract allows payment in lieu of notice, redundancy terms, or “garden leave” (where you remain employed but don’t work).

Red Flags to Watch Out For

While many contracts are fair, some contain worrying clauses. Look out for:

• Missing pay or hours details
• Overly broad restrictive covenants
• Clauses that suggest bonuses are at the employer’s “absolute discretion”
• Terms that conflict with statutory protections (e.g., unpaid holidays)

If something looks suspicious, don’t ignore it. Get advice before signing.

Common Employment Contract Disputes

Employment disputes often stem from unclear or unfair contracts.

Hidden Deductions from Pay

Some employers include vague wording allowing deductions for training costs or “losses.” Employees should challenge these.

Misclassification of Workers

Freelancers treated like employees may bring claims for holiday pay or sick pay.

Constructive Dismissal

If an employer breaches the contract such as changing hours without agreement an employee may resign and claim constructive dismissal.

Restrictive Covenant Battles

Non-compete clauses often end up in court. For instance, Manchester’s tech sector has seen disputes over staff joining rival firms after leaving.

When to Seek Legal Advice in Manchester

Employment contracts are technical documents, and mistakes can have long-term consequences. Legal advice is strongly recommended:

• Before signing a new job contract
• When restrictive covenants seem too broad
• If you’re negotiating senior-level terms
• When facing redundancy or a settlement agreement
• If your employer breaches the contract

Early advice can save you stress, money, and even your career. 

How Our Deluxe Law Chambers Solicitors Can Help

At Deluxe Law Chambers, we regularly help both employees and employers with employment contracts. Our services include:

• Contract reviews: checking for hidden risks
• Negotiating fairer terms: especially around bonuses and restrictions
• Resolving disputes: from pay issues to dismissal claims
• Tribunal representation: if your case goes further

Call our Manchester employment solicitors today on 0161 464 4140.

FAQs About Employment Contracts in the UK

What should I check before signing an employment contract? 

Key areas include pay, benefits, working hours, notice periods, probation terms, and restrictive covenants. Make sure they are clear and lawful.

Are all UK employees entitled to a written contract? 

Yes. Employers must provide written particulars of employment within two months.

What clauses are most commonly disputed? 

Bonuses, restrictive covenants, and notice periods are common flashpoints.

Can my employer enforce a non-compete clause? 

Only if it is reasonable in time, geography, and scope. Courts strike down excessive restrictions.

What should I do if my employer breaches my contract? 

Try to resolve it informally first. If that fails, seek legal advice. You may be able to bring a claim in the employment tribunal. More resources related to this Skilled worker visa guide.