Is It Illegal To Work Without A Contract Of Employment In The UK?

Although it’s common practice for employers to provide their employees with a written contract of employment, it is not illegal if a business decides to hire employees without a contract. With that said, employers in the UK are legally required to provide any employees completing work for them with a “written statement of employment particulars” – which is essentially the bare minimum an employer must provide. It covers only the most basic terms like working hours and pay, and is required from the very first day of employment.

If you choose to do business without a contract in the UK, then this is perfectly legal so long as both the employer and employee agrees to work without a written employment contract. Employment law in the UK simply calls for a document containing a written statement of the employment particulars.

Of course, you might extend what’s in the confines of that written statement verbally, but remember that a verbal contract and anything agreed orally won’t stand up in court or employment tribunals if things go wrong. Relying on verbal contract terms can be risky for both you as the employer and your employees. If you want to ensure your contract terms are met, always ensure you provide a written contract of employment to all employees.

What Is An Employment Contract?

If you opt to operate without employment contracts, that’s fine, but you ought to at least know what they are so you can be sure it’s something you don’t need at your business.

An employment contract is legally binding. It’s essentially an agreement between employer and employee that sets out the written terms and conditions of employment for both parties. It looks different from business to business and industry to industry, but it should fundamentally contain:

• Job title and job description
• Place of work
• Hours of work
• Rate of pay and benefits
• Holiday entitlement
• Notice periods
• Sick pay eligibility
• Disciplinary and grievance procedures

The main benefit of having a written contract is that it takes implied terms which may be agreed orally, and puts it into a written record that is a legally binding agreement for both parties. It provides certainty and protects employee statutory rights such as receiving the National Minimum Wage, minimum period for rest, and holiday entitlements.

Employment contracts don’t need to be complex, in fact, they ought to be as simple as possible to ensure both parties fully understand their obligations under the agreement. Both the employer and employee should then sign the contract to prove they understand the terms and agree to them.

What Are The Main Types Of Employment Contracts?

There are several different types of employment contract which covers different types of employment:

Permanent Contracts

A permanent contract is an ongoing employment contract with no fixed end date. Essentially this ensures the terms of the contract are to be met indefinitely, until either party decides to terminate it. There will be terms within the contract that sets out the notice periods expected should the employer or employee decide to terminate the contract. They’re the most common type of long-term employment contract.

Fixed Term Contracts

Fixed term contracts work much the same as permanent ones, except there is an agreed end date or circumstance agreed before employment. For example, the contract may end on the 04 January following the Christmas rush, or after another member of staff returns from illness. Under fixed term contracts, there is no expectation that the employer will be providing employees with a renewal, and so no notice period is required. There will usually be terms relating to ending the fixed term contract early for both parties, however, which should be clear to protect employer and employee rights. This is the most common employment contract for temporary roles.

Zero Hours Contracts

Although zero hour contracts are set to be banned with the new government’s Employment Law Bill, a zero hour contract is an agreement between employer and employee that states there is no legal requirements to provide any working hours. The employee agrees to flexible working, only working when the business demands it. If an employer fails to provide any hours during a working period, they are well within their right to do so. Zero hours contracts suit casual roles with unpredictable workflows.

Agency Worker Contracts

Here the agency is simply contracting the worker to provide services to specific clients on a much more flexible basis. The ’employee’ in this situation isn’t actually employed by a specific business, which is great for flexible working, but bad for those workers looking for more stability.

Freelance Or Consultancy Contracts

If you’re self employed, then you’ll likely have different contracts with different contractors and clients. Here you are ’employed’ by the client for only as long as the project or service is required. Obligations are far more limited here, and you’ll likely be working for a combination of clients at the same time.

Apprenticeship Agreements

An apprentice is a person that is employed by a business or company whilst also undertaking structured training to improve skills relevant to the job. Within the contract there will be provisions for a reduced rate of pay to reflect that they are in training, whilst still outlining all of their key employment rights and terms.

Is A Verbal Agreement Valid?

Yes, a verbal contract is legally valid in the UK, but it will be difficult to prove if both parties don’t agree to the terms discussed. The main reason a verbal employment agreement is valid in the UK is to protect workers who have accepted a job offer, but who haven’t had written terms given to them yet.

What Is The Legal Requirement For Written Terms?

Under the Employment Rights Act 1996, employers must provide employees with a ‘written statement of employment particulars’ covering certain required information such as pay and work location.

As a minimum, the written statement must include:

• The employee and employer’s name
• The start date of employment
• The date the employee’s continuous employment started
• The method, rate or scale for calculating pay
• The frequency of pay e.g. weekly, bi-weekly, monthly
• Working hours such as normal hours, days of work etc
• Holiday entitlement details
• Sick pay eligibility
• Pension scheme details
• Notice periods
• Job title or description
• End date for fixed-term contracts
• Normal place of work
• Disciplinary and grievance procedures

Therefore, even if flexible working arrangements or other terms are agreed verbally, these still need to be documented in writing to comply with legal requirements.

What Are The Consequences Of Not Providing Written Terms?

Businesses that have failed in providing employees with at least a written statement in the UK have faced serious consequences. Bare the following in mind:

• If an employee makes a request for a written statement and you fail to provide one, you will be breaking UK law.
• Any verbal terms agreed to will be difficult to enforce without at least a written statement containing the basic terms of your employment agreement.
• Without written terms you can’t ensure the employee has understood all of the terms including key company policies such as disciplinary action, dress code, etc, which makes enforcing them difficult.
• If you operate in an industry where intellectual property and confidentiality are important, you’ll be left unprotected if all they do is agree to storing confidential information safely. Any breach would be difficult to enforce without a proper written record.
• An employee can claim unfair dismissal more easily without proper notice of official procedures which would usually be provided in writing.

Failing to meet your obligations as an employer could lead to legal action and an employment tribunal which could mean financial penalties. Relying on a verbal contract can be a dangerous game, which is why most business owners opt for written terms.

What Steps Should You Take To Ensure Both Parties Are On The Same Page?

If you decide to provide a written contract to protect yourself and your employee, then you should:

1. Develop Written Terms

Start by consulting HR professionals who can help you draft appropriate written terms that ensures all of the main information is covered, as well as any additional terms that are necessary for your business or industry.

2. Allow Time for Review

At least 24 hours should be given to allow a new employee the time to properly review the written terms before signing. Reviewing terms can be a time consuming, so make sure you allow the employee a suitable amount of time and respect any request for an extension.

3. Sign The Agreement

The employee and you should sign and date the written terms, providing them a copy and keeping one for yourself to ensure you both have proof of the terms of the employment contract later down the line should anything go wrong.

4. Follow The Agreements

You should ensure both you as the employer and your employee sticks to the written terms. By both acknowledging and following the terms, the validity of the agreement can be demonstrated.

5. Update The Terms As Needed

It’s important to ensure the terms of any employment contract are regularly reviewed to ensure relevancy should any key changes be made. These new terms will need to be reviewed and signed again to keep the terms current. In employment law, any previous employment contract is void after signing a new one.

Are There Any Precursors To A Full Written Contract?

Remember that it may take some time to get a written contract over to any new employee. In the meantime, the following serve as a precursor:

Whilst both protect employer and employee to some degree, if you want the benefit of full protection under the law, a full written contract should be provided to protect both parties.

When Does A Full Written Contract Become Essential?

While not an outright legal requirement, having a full written contract becomes particularly important if:

• The employee will have access to confidential information or trade secrets. Additional confidentiality and IP clauses are required here for additional protection.
• The employee represents or deals directly with clients/customers. More extensive service and conduct terms can be set here to ensure they are representing your business well.
• The employee holds a senior or management position. As employees become more senior, a written contract becomes more important.
• The role comes with additional benefits like a company car, phone, stock options etc. Terms around use, return and forfeiture of these benefits should be defined.
• Extensive training or professional development is provided. ‘Minimum service’ clauses may be justified to protect your investment if the employee leaves shortly after, whereby they may be liable to return some or all of the cost of training to you.
• Unique circumstances apply like remote working arrangements, flexible hours or atypical roles. Documenting the specific agreements provides clarity and ensures you’re both on the same page.

Even if nothing above applies, most small businesses see a full written contract as essential to provide as much protection as possible.

What Issues Can Arise Without Written Terms?

Some potential issues that can occur include:

• Confusion – Verbal agreements can be misinterpreted or forgotten, leading to disagreements later on.
• Enforceability – It becomes much harder to enforce verbal agreements and contractual terms without written evidence.
• Benefits – Any additional benefits beyond statutory minimums are hard to track without written confirmation of what was agreed.

Why Do Some Employers/Employees Work Without A Contract?

If all of the benefits we’ve discussed today are true, then why do some industries/businesses choose to operate without a contract?

While working without an employment contract carries risks, some employees may make the choice deliberately in certain circumstances. For example, in more casual or temporary roles employees and employers may prioritise the flexibility of not having contracted hours or duties.

Some may hope that without written terms, they can negotiate better pay or conditions, too. However, the risks often outweigh any perceived benefits.

Ultimately, knowingly working without a contract indicates a concerning power imbalance in the employment relationship. Responsible employers will wish to formalise agreements in writing to protect all parties.

It also protects you from potentially complicated legal minefields, such as if an individual is working illegally in the UK, and is therefore trying to avoid signing any employment contract so there is no written evidence of their work.

Written contracts protect all parties involved from a myriad of issues.

Options If You Find Yourself Working Without Written Terms

If you and your employee(s) have been working together without a contract in place, then reading our post today may make you want to change your approach. Don’t worry, there are steps you can take to formalise your working arrangement:

• Discuss your options with your employee to see what they prefer. If they’re resistant to the idea of a written contract, explain why you think it’s for the best.
• At the very least, a written statement of their employment particulars should be provided if they haven’t been already. It’s a legal requirement that you do so.
• From that moment, keep your own records of verbal agreements made between the two of you if they do not want a written contact to formalise their employment.

It’s normal at the start of a new employment for the written contract to take a short time to get together, but the quicker you can finalise the written terms for both parties the better it will be.

Seek legal advice if you’re unsure about how to approach a written contract with an employee who hasn’t been on one before.

Conclusion

To summarise the key points, while it is not outright illegal to work without a written contract in the UK, employers are still required to provide employees with a basic written statement of terms. This helps protect the rights of both parties.

• Verbal agreements are legally valid but are often unclear and therefore not something you can use in a legal setting or tribunal should it come to that.
•  Full written contracts bring significant additional advantages and protections for both employer and employee.
• That’s why employment experts strongly advise formalising details in writing wherever possible.
• If any concerns arise about refusal to document agreements, it may become safest to exit the unstable employment situation/terminate any verbal contract you have with your employee.
• Seeking guidance to ensure you use the right contracts demonstrates professionalism and benefits all involved, so make it a priority at your business.

Overall, verbal employment deals are risky territory. Small business owners should prioritise formally defining their workplace agreements in a spirit of clarity, fairness and mutual protection. Doing so cements professional relationships and provides security for the future.