Employment contracts for your first UK hire: what founders need to know

Hiring your first employee is a milestone. It also comes with a stack of legal obligations that catch a surprising number of founders off guard. This post covers what you must include in an employment contract, a few things you should include even if you are not required to, and some common mistakes to avoid.

This is not legal advice. If you are unsure about anything specific to your situation, speak to an employment solicitor before you make the hire.

Why the contract matters before day one

Under UK law, employees are entitled to a written statement of particulars from their first day of work. This is sometimes called a Section 1 statement, after the Employment Rights Act 1996. It is not optional, and you cannot delay it until after a probation period or trial run.

Getting this wrong can expose you to tribunal claims and, frankly, creates a messy start to the relationship.

What you must include

The statutory minimum is a "principal statement" covering:

• Names of employer and employee
• Job title and description of work
• Start date and (if different) the date continuous employment began
• Place of work
• Pay: amount and frequency
• Working hours, including any terms about working on Sundays or bank holidays
• Holiday entitlement and pay (the statutory minimum is 5.6 weeks including bank holidays)
• Sick leave and sick pay arrangements
• Notice periods on both sides
• Whether a pension scheme applies
• Any collective agreements that affect the role
• For non-permanent roles: the expected duration, or the end date if fixed term

You must also provide, on or before day one, supplementary details about disciplinary and grievance procedures, training entitlements, and any other paid leave (such as maternity or paternity).

What you should include beyond the minimum

The statutory list sets a floor, not a ceiling. A well-drafted employment contract will typically also cover:

Probation period. Not a legal requirement, but important. Spell out the length (three to six months is common for early hires), what review looks like, and what happens if someone does not pass. Shorter notice periods during probation are standard.

Confidentiality. Your employee will have access to sensitive information. A confidentiality clause that survives termination is straightforward to include and worth having.

Intellectual property assignment. Anything an employee creates in the course of their employment generally belongs to the employer under UK law. But "course of employment" can be ambiguous, especially in a startup where people wear many hats. An explicit IP assignment clause removes doubt.

Outside work and conflicts of interest. If you need your employee focused on your company, say so. A clause restricting paid work for competitors during employment is reasonable; post-termination restrictions are a separate and more complex topic.

Post-termination restrictions (restrictive covenants). These prevent former employees from immediately joining competitors or poaching your customers. They are enforceable only if they are reasonable in scope and duration. Broad, boilerplate restrictions often fail. If you want these to hold up, tailor them and take legal advice.

A note on employment status

Before you draft anything, be clear about whether this person is an employee, a worker, or a self-employed contractor. The classification affects tax, national insurance, holiday pay, and a range of statutory rights.

HMRC's CEST tool is a useful starting point for checking status. Getting it wrong, particularly misclassifying employees as contractors, is an increasingly common and costly mistake for startups.

Common mistakes founders make

Using a template without reading it. A contract you do not understand is a contract you cannot enforce and cannot explain to your hire. Read it before you send it.

Copy-pasting from a US source. US employment law is fundamentally different. A US offer letter will miss key UK statutory requirements and could include clauses that are void or unenforceable in the UK.

Leaving salary reviews vague. If your contract says salaries are reviewed annually, that creates an expectation. If you say nothing, at least you have not promised anything. Founders often include a review clause without thinking through what it commits them to.

Not keeping a signed copy. Both parties should sign and retain the contract. Digital signatures are legally valid in the UK under the Electronic Communications Act 2000, so there is no excuse for unsigned paperwork.

Getting the document right from the start

A well-drafted employment contract takes maybe an hour to put together from a solid template, but it is worth doing properly. You will use the same base document for every subsequent hire, so the upfront investment pays off quickly.

StartupDocs includes a professionally drafted UK employment contract template that meets the Section 1 requirements, covers the clauses above, and can be edited and exported in the formats your HR or payroll provider needs. Run a compliance check before you send anything out, and always review the final document with fresh eyes before your new hire signs.