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Employment Contracts for First Time Employers

Employment Contracts for First Time Employers
20 December 2017

Hiring your first employee is a milestone for your business.  While becoming an employer may feel daunting, a bit of planning and research can make it a smooth and painless transition. In this article we give an overview of employment contracts, employment policies and legal aspects of the recruitment process.

First and foremost, you need to make yourself aware of your legal responsibilities as an employer. This means you also need to understand a bit about things such as anti-discrimination and PAYE.  But fear not - there’s plenty of information freely available from government agencies and websites specialising in employment law and legal documents.  We've compiled a list of tips to get you started:


The Equality Act 2010 makes it unlawful to treat someone less favourably or discriminate directly or indirectly against someone in recruitment or employment on a range of "protected characteristics" which include: age, disability, gender reassignment, race, religion, sexual orientation, marriage/civil partnership status, pregnancy or maternity.    There are exceptions and in such cases you must be able to objectively justify the requirement.

When advertising a job you cannot advertise, for example, for someone of a particular age or say that the job is 'unsuitable for disabled people'. When recruiting, avoid asking for personal details such as marital status or child care arrangements which could allow discrimination (or make the applicant claim that you have discriminated against them).  Certain types of health or disability-related questions can only be asked once a conditional job offer has been made, so steer clear of these types of questions as well. 

If you need more help on the recruitment process then the ACAS website is a good place to start. They also offer regular training courses at different locations around the UK.

The Employment Contract

Every employee has a contract of employment with their employer whether there is a written contract or not.

As an employer, you are required to give anyone you employ (for at least 1 month) a 'written statement of employment particulars' within 2 months of starting work.  This is the document often referred to as the employment contract.   The contract of employment will set out details of the job, pay, holidays, notice periods, pension provision, collective agreements and the names of who to go to about grievances or disciplinary action.  It’s best to have a written employment contract so that the terms of employment are clearly stated.

The employment contract must, by law, also state where an employee can find out information about your grievance procedure, disciplinary and dismissal procedures and sick pay procedures.  Often this will be a reference to a staff handbook or noticeboard. 

Employment Policies and Procedures

The minimum entitlements and pay rates for maternity leave, sick leave, paternity maternity and adoption leave are set by law but you may offer more generous terms if you wish.   You would probably state what you offer in an appropriate policy document e.g. a maternity policy document.  Such policies needn't be lengthy but it pays to clearly set out what benefits you are providing.

Depending on the size and nature of your business you may also decide to have written policies in the following areas so that your employees know what is expected of them:

  •           Smoking in the workplace
  •           Anti-bribery
  •           Use of computers (including personal use of social media)
  •           Driving (and use of company vehicles)
  •           Alcohol and drug misuse.

PAYE and National Insurance

If you haven't employed staff before then one of the first things you need to do is register as an employer with HMRC.

As an employer you are required to pay your employees at least the national minimum wage and to issue employees with a written record of their pay and any deductions.  They key to getting PAYE and National Insurance Contributions (NICs) right is good record keeping.  If you have an accountant then you could ask them to run your payroll for you. It's important that you keep adequate payroll records and pay HMRC on time.


If your employee is expected to earn at least the National Insurance Lower Income then you will be required to make PAYE deductions from their pay and pass this money on to the HMRC.  You also have to deduct NICs and make your own employer contributions in the same manner.  Of course, it's more complicated than that with tax codes, deductions and allowances and the inevitable changes from HMRC relating to what is and isn’t taxable and various thresholds. 

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