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What should be included in a contract of employment?

Whilst there are some items which will be required to be dealt with in writing and included in a contract of employment, for others, it will depend on the nature of your business, the role to be performed by the employee and the employee’s seniority as to which terms are beneficial to include.

Obligations of confidentiality

It is an implied term in every contract of employment that employees must keep trade secrets relating to your business confidential.  However, an express contractual clause in writing can better protect you by expanding on what information you consider is confidential information (which would be much wider than trade secrets) and what the consequence of breaching this duty will be. This means your employees are aware of your expectations relating to confidentiality from the beginning of the employment relationship and before they have access to your business’ confidential information and can potentially do anything damaging with it.  What information is critical to your business to protect is specific to you and so seeking early expert advice to ensure that you have included in the definition of confidential information those items that are pivotal for your business to keep confidential, is advisable.

Having an express, written provision relating to confidentiality in an employment contract can also offer your business protection after an employee leaves your business. For further information about how in your business’ specific circumstances you can maximise protection of confidential information, please contact one of our specialist employment lawyers, who can guide you. 

How intellectual property will be dealt with?

Again, the level of protection that will be needed for your business’ IP will be dependent on the type of business you have and the role and duties of the employee. That said, it is advisable to have some basic written provision to protect your business’ IP in all employment contracts.  These clauses will build on an employer’s rights as first owner in materials and inventions created during an employee's employment, other than in some patentable inventions, and to clarify when IP should pass to your business.

Our expert employment lawyers can help ensure that your business is best protected by looking at the specifics of what your business will need. Particularly if you have an employee in a creative, technical or inventive role in your business, you may require further protection and a more robust IP clause. Seeking early specialist advice in those circumstances is highly recommended.

Detail on notice periods and how notice will be dealt with

For example will garden leave and/or payment in lieu of notice be an option at your discretion?

It may be that the statutory notice periods will be used and if this is the case these can be stated clearly in the employment contract. If you are offering an enhanced contractual notice period, this will need to be set out clearly in writing in the employment contract. If there is going to be the option for your business to pay an employee in lieu of their notice period, this will need to be made clear and the basis of calculation of the notice pay (whether this will include benefits or be at a basic salary rate) should also be set out.

If you want to reserve the right to place an employee on garden leave, this contractual right should be included in the contract of employment. Further, the contract or a separate policy can have further details about what the employee should and should not do during any garden leave period. For further guidance on notice periods, payment in lieu of notice or garden leave, our employment solicitors can help.

Obligations for the employee on termination of employment

Such as return of company property and continued confidentiality and intellectual property provisions

Making clear how all loose ends will be tied up at the end of an employee’s employment with your business can save time and misunderstandings at a later date, and better protect your business’ property, confidentiality, and IP. Drafted well, these clauses can serve as a helpful reminder to ensure all passwords are returned as well as hardware, for example. There may be more complicated matters to consider if a senior employee or director is leaving your business and so getting an expert employment lawyer to draft arrangement on termination provisions can be helpful.

Post-termination restrictions

Which you would like the employee to be bound by for a reasonable and limited period after the termination of their employment, such as non-compete, non-solicitation of particular clients, or non poaching of staff.

If you are looking to restrict employees’ activities after they have been working for your business to protect your legitimate business interests, this can only be done in writing and initially, is best done at the beginning of the employment relationship. This might be done in an employment contract or a separate restrictive covenant agreement, but to give post termination restrictions the best chance of being enforceable it is advisable that you seek legal advice in your specific circumstances before sending the contract to an employee for agreement. If post termination restrictions are too wide and go further than are necessary to protect your legitimate business interests, they may be void and will not offer your business the intended protection against non-competition, non-solicitation, non-dealing or non-poaching of employees.

Further detail on sick pay and procedures, or at least where these can be found

It may be that you have a full sick pay procedure or a staff handbook containing these policies. If so, you can state some of the headline points in the employment contract and make clear where the employee can find further details.

If you do not have a separate policy, you should set out sick pay entitlement and sickness absence procedures fully in the employment contract.

Further detail on disciplinary and dismissal procedures and grievance procedures

You are required by law to have a written disciplinary procedure and a written grievance procedure. This must comply with the ACAS Code of Practice on disciplinary and grievance procedures. For flexibility we would advise referring to the policies in the contract of employment and then clearly directing the employee as to where these can be accessed in full. It may be that this is on your business’ intranet, from your HR personnel, a manager or in a staff handbook issued to all staff and regularly updated.

Specific clauses relating to the types of employment benefits that employees might receive

For example, bonuses, commission, company car or healthcare.

If an employee is to receive any other benefits in addition to their salary and annual leave, these will be clearly identified in the contract of employment and the employee will need to be advised where further information can be found about the benefit. It is unlikely that the full details of a bonus scheme would be set out in the employment contract, for example, but the employee should have access to any accompanying document and be told where this can be found.

Governing law and jurisdiction of the contract

This is to ensure that it is clear to both parties which jurisdiction the contract is governed by and where any disputes will be resolved.

How can I get help writing a contract of employment?

If you would like assistance with drafting or updating your business’ employment contract or specific clauses within it, our specialist employment solicitors can fully appraise your specific businesses needs with you and review and draft from scratch or update a bespoke contract of employment for your business. Whilst it may be tempting to use a free online template, this can be a poor economic saving in the longer term, if for example, your business’ confidential information or IP is not properly protected, or post termination restrictions are void and do not offer the expected protection from non-competition of former employees. For this reason, it is worth getting the initial employment document right and seeking professional advice at an early stage, to save time and money in the longer term by ensuring the contract meets your business’ specific needs.

About our expert

Sally Gwilliam

Sally Gwilliam

Employment Partner
Sally joined the employment team in August 2021 as a senior employment solicitor and became a partner in October 2023. Sally qualified in 2004 at international law firm DLA Piper, and worked there for a further 11 years. There she gained excellent skills and experience in employment law working for medium and large businesses across multiple jurisdictions and on complex legal and strategic issues. Since 2015, Sally has worked for two smaller legal businesses where her client base changed to SMEs giving her a fantastic understanding of the differing needs and priorities of any size of business and in a wide range of sectors.

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