When you hire your first employee, the contract usually comes from one of three places: a template bought online years ago, a document borrowed from a previous employer, or — most often — nothing at all, because the hire was a friend, a referral or someone who "just started helping out." All three create the same problem: when the relationship sours, there is no reliable written record of what was agreed, and the law fills the gaps in the employee's favour.

Getting the written foundations right at hire is the highest-value hour of legal hygiene a small business can do.

The day-one legal requirement

Since April 2020 (the Good Work Plan changes), every worker — not just employees — has the right to a written statement of employment particulars on or before their first day of work. The requirement sits in section 1 of the Employment Rights Act 1996, as amended. This is not optional and not dependent on headcount: one part-time employee triggers it.

The day-one statement must include, as a single document (the "principal statement"):

• the names of employer and employee/worker;
• the start date, and the date continuous employment began (relevant where service transfers);
• the pay (or how it is calculated) and pay intervals;
• hours and days of work — including whether they are variable and how variation is decided;
• holiday entitlement and holiday pay, including entitlement on termination;
• the place of work, and any other places the person may be required to work;
• job title or a brief description of the work;
• any probationary period, its conditions and length;
• any benefits not covered elsewhere in the statement;
• any training entitlement, including which parts are compulsory and whether the worker must pay for them;
• any paid leave beyond holiday (for example, family leave arrangements);
• the notice periods each side must give.

A second set of particulars can follow within two months: pension arrangements, collective agreements, disciplinary and grievance procedures (or where to find them), and overseas-working details. The full list is in sections 1–3 of the Act, and GOV.UK's employment contracts guidance summarises it plainly.

Failing to provide the statement is not itself a standalone fine, but it adds two to four weeks' pay to awards in almost any tribunal claim the employee later wins — a pure self-inflicted penalty.

A statement is not a contract

The written statement is evidence of the contract, not the contract itself. The contract exists the moment someone accepts the job — even verbally — and it includes terms implied by law and by custom: mutual trust and confidence, the duty to provide a safe workplace, the duty to pay wages. This matters because employers sometimes believe that "nothing was signed" means nothing is agreed. Everything is agreed; you just did not choose the words.

The clauses small businesses forget

Beyond the statutory list, these are the clauses that most often decide real disputes:

Probation. Length, notice terms during probation, and an express right to extend. Without an extension clause, probation expiry can imply confirmation.

Notice. Statutory minimum notice is one week after one month's service, rising by a week per year up to twelve (section 86, Employment Rights Act 1996) — but that is a floor, not a sensible default. Key hires commonly carry one to three months' notice both ways.

Place of work and mobility. If you may relocate or require site working, say so. A contract silent on location can make a five-mile office move a breach of contract.

Hours and flexibility. For variable-hours staff, state how hours are set and what guaranteed minimum applies. The Employment Rights Act reforms on guaranteed hours for zero-hours workers are progressing — check the current position on GOV.UK before relying on zero-hours structures.

Restrictive covenants. Non-solicitation and non-dealing clauses for roles with client relationships. They must be no wider than necessary to protect a legitimate business interest, or they fail entirely. Template covenants copied between unrelated roles are usually unenforceable; bespoke, narrow drafting is what survives.

Confidentiality and IP. Employees' inventions and works have default statutory rules; a clear clause avoids arguments about who owns work created at home or outside hours.

Deductions. An express deductions clause is what lets you lawfully recover overpayments, training costs or unreturned equipment value. Without it, deducting from wages risks an unlawful deduction from wages claim under Part II of the Employment Rights Act 1996 — where tribunals have historically been able to look back across a series of deductions.

Layoff and short-time. A contractual right to lay off without pay only exists if the contract grants it. Employers who discovered this in 2020 learned it the expensive way.

Template hygiene

If you use a template — and most SMEs should start from one — apply three rules:

1. One master template, versioned. Every hire gets the current version; note which version each employee signed. Field-level customisation happens in the particulars, not by editing clauses per hire.
2. Match reality. A contract promising 9-to-5 office hours for a team that actually works hybrid is evidence against you, not for you. Contracts should describe the job as it is, and change when the job changes (by agreement, confirmed in writing).
3. Review on trigger events. Promotion, relocation, significant pay change, moving from casual to permanent — each should trigger a written variation. Terms drift; paper should not.

First-hire contract checklist

• □ Day-one written statement issued to every worker before they start
• □ All section 1 principal-statement items covered, including probation, training and benefits
• □ Supplementary particulars (pension, procedures) issued within two months
• □ Notice periods set deliberately, not left to the statutory floor
• □ Place of work, mobility and hours-variation clauses match actual practice
• □ Deductions clause included
• □ Restrictive covenants only where genuinely needed, narrowly drafted
• □ Confidentiality and IP clauses present for relevant roles
• □ Master template versioned; signed copies stored and retrievable
• □ Written variations issued on promotions, moves and significant changes
• □ Zero-hours or variable structures checked against current Employment Rights Act reforms

The practical takeaway

Nobody regrets having clear written terms. Every employment dispute starts with "what was agreed?", and the employer who can answer that question with a signed, current document starts from strength. The one who cannot starts by reconstructing emails from two years ago.

If your contracts came from a drawer, a download or a previous employer — or you are about to make a first hire and want the foundations right — book a discovery call with The People Powered at start a conversation with The People Powered.

This article is general guidance for employers, not legal advice on a specific case.