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HMRC internal manual

National Minimum Wage Manual

Status: Contract of employment

Contracts of employment fall under the same law as all other contracts (NMWM04030).

A contract of employment contains the rights and duties of both employers and employees and is less commonly called a “contract of service”.

The most important legislation that outlines many of the duties owed by employers to employees is the Employment Rights Act 1996. This requires that all employers must provide employees with a written statement of their particulars of employment within two months of commencing work.

All contracts of employment contain;

  • Express terms- these are the elements of the contract which are precisely spelled out, either in the contract of employment itself or by reference to collective agreements or employee handbooks. Such terms include pay, hours and holidays.
  • Implied terms- these are not expressly stated because, in the main, they are fairly obvious to both parties to the contract of employment. Implied terms include maintaining trust and confidence through co-operation, acting in good faith towards each other and taking reasonable care to ensure health & safety in the workplace.
  • Statutory Rights- these are the statutory rights of the employee and must be honoured by the employer. Such rights include minimum wage, equal pay, notice periods, sickness entitlements, maternity/paternity leave, flexible working, and redundancy pay.

Because the contract is binding on both parties, it cannot be changed without the agreement of both sides. However, a variation may be made at any time by agreement between an employer and the employee.

A person working for an employer under a contract of employment will always qualify as a worker (NMWM05020) for minimum wage purposes - even if the written statement has not been provided according to the Employment Rights Act 1996.