Employment Contracts for SMEs
What should be in an employment contract, when you need one, and what happens if you don't. Straight answers from Lilac HR.
Employment Contracts: What Every SME Needs to Know
Every employee needs a written statement of terms from day one, and most need a full contract too. Get this wrong and you're exposed the moment something goes wrong, a dispute, a resignation, a tribunal claim. Here's what actually needs to be in there, when you need one, and what to do if you've been winging it so far.
Common Questions
Every contract needs to cover pay, working hours, holiday entitlement,job title, place of work, and notice periods as an absolute minimum. It should also reference sick pay, pension, and where to find your disciplinary and grievance procedures. Miss any of these and you're not compliant, even if everything else looks solid.
What are the key elements of an employment contract?
Yes. every employee is legally entitled to a written statement of terms from their first day of employment. There's no grace period, and this applies from day one every for very short term or casual staff.
Do I have to give my staff a written contract?
On or before their first day. This is a legal requirement, not best practice, so "I'll sort it once they've settled in" isn't an option, however small the business.
When do I need to provide a contract to a new employee?
You're exposed. Without a written contract or statement of terms, disputes over pay, hours or notice become far harder to resolve in your favour, and you're already in breach of a legal requirement regardless of whether anything's gone wrong yet.
What happens if I don't have contracts in place?
Only with their agreement, or a clause that specifically allows it. Changing terms unilaterally, even with good intentions, can amount to a breach of contract and in some cases, constructive dismissal, so this always needs handling carefully.
Can I change an employee's contract once it's signed?
What a Contract Must Legally Include
Every written statement of terms needs to cover the basics: names of employer and employee, start date, job title or a brief description of duties, pay and how often it's paid, hours of work, holiday entitlement, and place of work.
Beyond that, it should point employees toward where they can find details on sick pay, pension arrangements, notice periods, and your disciplinary and grievance procedures, these don't all have to sit inside the contract itself, but they need to be accessible and referenced.
The mistake we see most often isn't a contract that's missing entirely, it's one that was written years ago, for a different role, and never updated. If your contract still describes a job that's changed shape twice since, it's not doing its job.
Written Statement of Terms vs Full Contract
A written statement of terms is the legal minimum, the core facts every employee is entitled to from day one. A full contract goes further, it can include restrictive covenants, confidentiality clauses, variation clauses, and more detailed terms specific to the role or seniority.
Most small businesses need something in between, a proper contract that covers the legal minimum and adds the protections relevant to the role, without being forty pages of boilerplate nobody reads.
When You Need to Issue One: Day One, Always
There's no exception for "just a temp" or "only three months". Every employee, regardless of hours or length of engagement, is entitled to their written statement of terms from their first day.
If you've got staff who started without one, whether that's one person or your whole team, the fix isn't complicated, but it does need doing properly and soon, not left for "next quarter".
What Happens If You Get It Wrong
A missing or outdated contract rarely causes a problem until the exact moment you need it most, a dispute over hours, a disagreement about notice, or worse, a tribunal claim where you've got nothing in writing to point to.
Tribunals look unfavourably on employers who can't produce basic documentation. It doesn't need to be complicated to protect you, it just needs to exist, be accurate, and be signed.
How Lilac HR Can Help You Get This Right
You don't need to become a contracts expert. You need contracts that are accurate, compliant and actually reflect how your business runs, sorted once, properly, so you can stop thinking about it.
Don't want to start from scratch? Our How to HR Toolkit includes ready to use contract templates you can adapt in minutes, not weeks.
