16/11/2011

By Melanie Dawson, Marketing Co-ordinator Sage UK Ltd

As with all contracts, a contract of employment may be either written or verbal. For a contract to exist, there must be:

- A job offer.

- An acceptance

- An intention to create a legal relationship

The employee’s pay demonstrates the intention to create a legal relationship and it is created when the employee accepts the offer. A contract can exist before the employee starts work. If a written contract is not provided prior to start date, a verbal contract may still have been created.

If you want to avoid disputes about contractual agreements, then you should always put things in writing and seek legal advice.

Job offers

The offer (written or verbal) forms the basis of the contract. Once the employee accepts, the offer contract will exist. Be careful when making offers: a casual remark or suggested enhancement can cause problems. Make it clear if your offer is subject to receiving satisfactory references, or pre-employment checks.

Written terms and conditions

You’re legally obliged to provide any employee who has worked one month or more with a written statement, containing terms and conditions of employment within two months of starting work. This is not required for contractors or those with self-employed status.

The statement may be in the form of a written contract of employment, provided all of the required terms are outlined. If a written contract doesn’t exist, the written statement provides evidence of the main T&Cs of the verbal contract of employment. This provides proof, in the event of unfair treatment or employment tribunals.

The statement of T&Cs must contain the minimum of:

- Name of employer and employee

- Job title or brief job description

- Date of employment and the date continuous employment began

It’s a good idea to also include:

- Rate and frequency of pay

- Location

- Hours

- Holiday pay and entitlement


You must also provide other written information within two months of the employee commencing work by law, including:

- Sick pay and entitlements

- Pensions, including contracting out/stakeholder details

- Notice periods

- If the employment is temporary, the end date

- Details of overseas employment if applicable

- Details of any collective agreements that affect the employee

The statement must also specify:

- Disciplinary/dismissal rules and procedures. This information may be given by referring to your employee handbook

- The person to whom the employee can apply if they are dissatisfied with any disciplinary or dismissal decision

- The person whom the employee can apply to seek redress for a grievance

- Any additional grievance procedure steps. This information may also be given by referring your employee handbook


Written contract of employment

A written contract of employment can also include other T&Cs specific to the job or business, e.g. restrictive covenants. Always take legal advice before including restrictive covenants. A contract may include job-related conditions, such as having a current driving licence or wearing a uniform. The contract can also refer the employee to policies, rules and procedures contained in an employee handbook and make compliance with them a contractual requirement.

Continuity of service

Continuity of service is a complex issue, particularly in relation to seasonal employees or when there is a temporary cessation of work.

There are some situations where the question of continuity is clear-cut. Where a company has been transferred to a new employer and the TUPE (Transfer of Undertakings (Protection of Employment) Regulations apply, service with the previous employer (the transferor) will be included in the continuous service of employees who transfer. Where an employee has resigned and then rejoins, their previous service does not count. Short breaks of service, are more difficult to determine. If you are in any doubt, consult a legal adviser.

Seek confirmation of acceptance

The employee’s signature on a written contract is strong evidence for a tribunal. If there is no written contract, the employee should be asked to sign and date an acknowledgement of receipt of their written statement of T&Cs of employment. Retain a copy on the employee’s file.

Both parties to a contract can breach T&Cs. Where either party suffers loss as a result of the other’s action, they will be entitled to make a claim.


If you are unsure or need help with any of the above, seek legal advice. Sage offer a People Advice service that can help create and implement a contract of employment. We also offer Sage 50 Payroll software, enabling you to pay employees on time, record absence, pay frequency and holidays.

Information supplied by Sage Legal Department.


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