A well-drafted employment contract is your first line of defence as an employer. It sets out the terms of the relationship, clarifies expectations, and provides protection if things go wrong. Supporting documentation — such as a staff handbook, policies, and letters of variation — is equally important. Together, these documents form the foundation of a compliant, well-managed workplace. This guide covers what UK SMEs should include in their contracts and supporting paperwork, and why regular reviews are essential.
What a Contract Must Include
Under UK employment law, employers are required to provide employees with a written statement of particulars of employment. This must be given on or before the first day of employment. It should set out the key terms of the working relationship, including:
- the names of the employer and employee
- the job title or a brief description of the role
- the start date (and, where relevant, the date continuous employment began)
- pay details, including how often the employee will be paid
- hours of work, including normal working days and whether hours or days may be variable
- place of work, and whether the employee may be required to work at different locations
- holiday entitlement and holiday pay
- sickness procedures and sick pay arrangements
- notice periods for both employer and employee
- pension arrangements
- any probationary period, including its length and conditions
It is good practice to issue a full contract of employment rather than the bare minimum statement. A comprehensive contract reduces ambiguity and gives both parties a clear reference point if a dispute arises.
Key Clauses for SMEs
Beyond the statutory requirements, there are several clauses that employers should consider including to protect their business interests:
- Confidentiality: A clause restricting the employee from disclosing sensitive business information during and after employment. This is particularly important for roles involving client data, commercial strategies, or financial information.
- Intellectual property: A provision confirming that any intellectual property created by the employee during the course of employment belongs to the employer.
- Restrictive covenants: Where appropriate, clauses preventing the employee from competing with the business, soliciting clients, or poaching colleagues for a specified period after leaving. These must be carefully drafted to be no wider than necessary, as overly broad restrictions may be unenforceable.
- Probationary period: A defined probationary period with a shorter notice period, giving both parties an opportunity to assess fit before full terms apply.
- Disciplinary and grievance rules: A reference to the employer's disciplinary and grievance procedures, usually by directing the employee to the staff handbook.
Handbooks and Policies
A staff handbook is not a legal requirement, but it is highly advisable. It provides a central place for all workplace policies and helps demonstrate that the employer takes compliance seriously. Key policies to include are:
- Absence management: Reporting procedures, fit note requirements, and how short- and long-term absence will be handled.
- Disciplinary procedure: The process for addressing misconduct or poor performance, aligned with the ACAS Code.
- Grievance procedure: How employees can raise concerns and how the employer will respond.
- Equal opportunities: A clear statement that the employer does not tolerate discrimination, harassment, or victimisation.
- Data protection: How employee data is collected, stored, and used, in line with GDPR requirements.
- Health and safety: General responsibilities and any role-specific requirements.
It is good practice to ask employees to confirm in writing that they have received and understood the handbook. This can be done via a simple signature page or an electronic acknowledgment.
Variations to Contracts
If you need to change an employee's terms and conditions — for example, due to a restructuring, a change in working hours, or a relocation — the change must be agreed by the employee. A unilateral change imposed without consent is likely to be a breach of contract, and the employee may respond by working under protest, raising a grievance, or in some cases resigning and claiming constructive dismissal.
Where agreement is reached, the change should be documented in writing. This may take the form of a new contract, a letter of variation, or an updated statement of particulars. The employee should be given a copy, and the employer should retain the original. Even minor changes should be recorded, as verbal agreements are difficult to prove if challenged later.
Regular Reviews
Employment law does not stand still. Changes to legislation, case law, and ACAS guidance can all affect what your contracts and policies should say. It is good practice to review your documentation at least once a year, and immediately after any significant legal change. Areas that tend to shift over time include holiday pay calculation, flexible working rights, family leave, and redundancy rules.
A regular review also gives you the opportunity to check that your documents still reflect how your business actually operates. A contract that no longer matches reality can be just as problematic as one that is legally out of date.
Getting It Right from the Start
Good documentation does more than keep you compliant. It prevents disputes by making expectations clear from day one. It supports managers by giving them a consistent framework to follow. And it protects the business if a relationship breaks down. For SMEs without an in-house legal team, investing in properly drafted contracts and policies is one of the most cost-effective ways to reduce people-related risk.
If your current contracts are out of date, or if you are hiring for the first time and need documentation that fits your business, speaking to an HR professional can save significant time and difficulty further down the line.