Types of Employment Contracts

Given many organisations have staff performing a variety of roles, there’s no “one size fits all” when it comes to contracts of employment.

Some roles may require fairly basic contracts, but the nature of others may require specific clauses which are designed to protect the business – a “confidential information” clause being a key example.

With this in mind it’s important that organisations give particular care to deciding what type of contract/s of employment is/are required for staff. It’s also crucial to remember that the law requires organisations to issue prescribed information in writing to all workers (not just employees) on/before day 1 of their engagement.

This brief guide is aimed at giving an initial overview on the 4 types of contract that organisations typically use. When deciding which type your organisation might need, it’s worth noting that they can all be tailored to meet the specific needs of your business.

The 4 types of contract:

1. Section 1 statement:

The most basic form of contract, which simply includes those terms as are required by the law (there are quite a few, for example, pay, hours, location, holiday, notice, sick pay etc.).

Section 1 statements are generally reserved for very junior employees and are often limited to use in certain industries.

2. Junior employee contract:

This will include all of the terms contained in the section 1 statement plus a few typically utilised terms such as:

• Confidentiality obligations,
• Intellectual property retention clarifications/rights, and/or
• Data protection obligations.

This is the type of contract generally used for non-managerial employees.

3. Senior employee contract:

This will often include all terms contained in the junior employee contract plus terms more usually associated with those in managerial roles and/or senior leadership positions, such as:

• Full-time and attention obligations,
• non-compete obligations which take effect on the cessation of their employment by your organisation,
• the right to place the employee on garden leave,
• the right to pay in lieu of notice,
• FCA/other regulatory obligations which apply to the industry in which your organisation operates, and/or
• Company car/car allowance, private medical and/or permanent health insurance benefits.

4. Directors Service Agreement:

Includes all terms contained in the senior employee contract. However, it will often include detailed provisions regarding the ability to summarily dismiss, Board reporting/related obligations and/or resignation from office obligations.

With any type of contract listed above, organisations must also tailor the employment contract to reflect instances where the worker is engaged on a fixed-term, part-time, term-time or casual basis.

If you require any assistance with:
• identifying the most appropriate type of contract for your workers/employees;
• drafting section 1 statements, contracts of employment and/or service agreements;
• reviewing your current documentation to ensure it’s legally compliant, fit for your business needs and/or offers appropriate protections for your business; and/or
• drafting of bespoke terms for your current documentation…

…then please contact a member of our Employment Team on 0800 088 6004 for a no-obligation free initial call.