Understanding your contract

Many working rights are contained in contracts, making them vital documents to read and retain.

Types of employment status 

Your employment status and rights at work are determined by the type of contract you have.  There are three types of employment status:

  • Employee
  • Worker
  • Self-employed

An employee has a contract of employment and enjoys all the rights provided by different employment laws that exist in the UK. You’re an employee if you have an employment contract from your employer, tend to be provided regular work by your employer, and have to do the work they ask you to do, and must do it yourself.

Employees are entitled to rights, including written terms (see below), the right to sick pay, holiday pay, and parental leave pay. You’re also entitled to claim redundancy and unfair dismissal after two years’ service.

Employment law refers to an employee as being an individual who works under a contract of employment.

Self-employed people work for themselves so do not have all these employment rights. Self-employed people are responsible for when and how they work. They invoice for their pay, get contracts to provide services for their clients, can send someone else to do the work for them and do not get paid holiday or sick leave.

Self-employed people own a company or are freelancers. They can work for different clients and charge different fees. Self-employed people do not have many employment rights but are entitled to health and safety protections on a client’s premises, and protection against discrimination.

Community is the union for self-employed people, and we are campaigning for the self-employed to have more rights, including rights around parental leave.

Worker is an intermediate status between employee and worker.

If you’re a worker, you usually do have a contract for services – to do something in return for payment.

Workers do have employment rights including:

  • Written terms (see below).
  • Paid national minimum wage.
  • Paid holiday.
  • Payslips.
  • Protection against unlawful discrimination.
  • Protection against unfair dismissal.
  • Protection for whistleblowing.
  • To not be treated unfairly if you work part time.
  • Provided a workplace pension.
  • Statutory sick pay.
  • Statutory maternity, paternity, adoption leave and pay.
  • Statutory redundancy pay.
  • Shared parental leave and pay.

All of these, plus any additional rights, should be clearly laid out in your employment contract, which is why it’s important to read it before signing it.

What is a contract?

A contract of employment is defined as a contract of employment or an apprenticeship. A contract of employment may be in writing or it may be a verbal agreement. The purpose of an employment contract is to set out the rights and duties of both the employer and the worker – these are known as contractual terms. The most obvious example is that your contract says what work you’re expected to do, and what you’re entitled to be paid for it.

Even if you have nothing in writing, there are a number of factors to look for in order to establish that you are an employee working under a contract of employment:

  • Mutuality of obligation – an obligation on the individual to do work that is offered by the other party, and an obligation on the other party to pay the individual.
  • Personal service – the individual must perform work personally in return for payment and may not send a substitute to do the work for them (by contrast, a self-employed person is entitled to send a substitute)
  • Control – the individual is subject to a sufficient degree of control by the employer.
  • The other provisions of the contract are consistent with it being a contract of employment.

To be an employee there must be mutual obligation, control must exist and a requirement for personal service. If there are no mutual obligations, it is likely the individual will be a worker or self-employed.

Some employers will try to argue, and employees will often believe, that there is no contract because there is nothing in writing. A contract does not have to be in writing for it to exist. There are six factors to look for when establishing that a legal contract exists, these are:

  • Offer
  • Acceptance.
  • Capacity to enter a contract.
  • Intention to create a legal relationship.
  • Legality of terms.
  • Consideration.

As soon as an individual accepts an offer of work, a contract is formed. An individual must be able to show they have the legal capacity to enter the contract. For example, a visitor from a non-EU country without a work permit, or a child under 14 would not have legal capacity to enter an employment contract.

A contract with unlawful terms will not be enforceable at an employment tribunal, for example, where an individual agrees to work for cash in hand in the knowledge that the employer will not pass on any contributions for tax and National Insurance to the HMRC (HM Revenue and Customs), any claim for unfair dismissal where someone was dismissed would fail. Equally, an employer cannot include terms that would be unlawful, such as paying below the minimum wage.

To complete the contract there has to be “consideration”. This means that the individual and the employer must both give something of value to each other; this is usually work in return for pay.

Types of contractual term 

A contract may be made up of:

  • Express terms – these can be written or spoken and generally reflect what the parties wanted to happen.
  • Implied terms – terms can be implied into a contract where the express terms are incomplete, or where the parties have failed to include something that the law considers they intended to include.
  • Imposed terms – terms can be imposed by common law, statute or by negotiation with a representative body.
  • Incorporated terms – terms can be incorporated from other documents such as employee handbooks, company disciplinary & grievance procedures and collective agreements.

Written Statement of terms

Employees and workers who are employed after 6 April 2020 are entitled to receive a written statement of their employment particulars on or before the first day of starting work. The written statement isn’t the contract, because the contract contains much more than is in the written statement.

The written statement should contain the following:

  • Name of employee/worker and employer.
  • Date when the employment began.
  • Address of the employer and workplace.
  • Previous employment that counts towards continuous employment.
  • Job title (or a brief description of the work).
  • Rate and period of pay.
  • Hours of work.
  • Holiday entitlement including holiday pay.
  • Information about any other paid leave (or where to find that information).
  • Sickness scheme.
  • Pension arrangements (if not included, the employer must say where the employee can find it).
  • Notice arrangements.
  • Grievance/disciplinary procedure.
  • If employed to outside the UK; the duration of the work abroad, payment of wages (including the currency in which paid); terms after returning to the UK
  • If the contract is a fixed term contract, the expiry date.
  • Any collective agreements directly affecting the terms and conditions.

Some of these terms can be provided up to two months after the beginning of the employment- these are marked with stars.

Changing a contract 

An employment contract may be changed by mutual agreement between the employer and employee. The contract may contain a variation clause allowing the employer to make changes to it. In these cases, there will be little an employee can do if the company acts reasonably when making the changes.

If the contract does not allow the company to make changes, an employee may be able to object to the changes. Any objections would need to be put in writing to the company at the earliest opportunity. If a company imposes changes and the employee works under these without registering any objections, these changes will be accepted by the employee by performing these new duties.

There may be times where an employee refuses to accept changes. An employer may look to end the existing contract with notice and then offer the new contract. There will be a dismissal in law even if the employee remains in employment. Any complaint would need to be presented to the Employment Tribunal within 3 months minus a day of the dismissal.

If you need help or advice, please contact us at help@community-tu.org or on 0800 389 6332.


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