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Employment Contracts – The Basics

Tuesday, 10 July 2012

Every employee has an employment contract with their employer whether it is written or not. Although there is considerable statutory protection for employees beyond the terms of their employment contract, the legal basis of the relationship remains contractual. Fundamentally therefore the common law principles of contract remain important to the agreement between the parties and any breach of that agreement.

Employment Rights Act 1996

The primary legislation governing the employment relationship is the Employment Rights Act 1996. Historically a contract of employment was known as a contract of service; distinguishable from contracts for services provided by a self employed person. Whether a person is and employee or not is a question of fact, how the parties define their relationship is irrelevant.

Defining an Employee

There is no single test to decide whether a person is an employee or not; the outcome will depend upon the circumstances in each case. A wide variety of issues may therefore be relevant but there are three core factors which are normally taken into account:

  1. Mutuality of obligation – the obligation for the employee to give personal service and the obligation on the employer to pay for that service;
  2. Right of control – the employer has the right of control over the employee; he can control how or when an employee carries out tasks; and
  3. The other provisions are consistent with a contract of employment.

Additional factors may include: method of payment, who bears financial risk, rights to substitute themselves and opportunity to profit.

Terms of Employment

Although there is no actual requirement for the contract of employment to be in writing it is unusual for there not to be a written contract.

In any event, employees who have been working for an employer for more than one month have a right to receive a written statement of employment particulars. The particulars must be received within two months of the employee starting their employment and must set out the main employment rights of the employee.

Terms can be imposed into contracts of employment by statute or due to the general inclusion of such terms in employment contracts. Terms may also be implied though the normal mechanisms of contract law such as through custom or practice where a particular term is certain and reasonable.


Although employment contracts are founded on the same basis as any other contract, employment protection legislation adds considerable complexity to their operation.

Rollingsons has experienced lawyers who can advise both employers and employees in relation to their employment contracts; for more information please contact James Crighton via e-mail or by telephone on 0207 611 4848.