Employment contracts might not sound like the most exciting subject ever, but don’t underestimate their importance in the employment relationship. As a legally binding agreement, it needs to create clarity and protection for both employees and your business. But a contract that isn’t well-drafted and accurate has the potential to cause problems. Could your contracts be exposing your business to risks?
When did you last review your contract templates?
While having templates can be useful when it comes to contracts (and other employment documents), the big risk with them is that they can continue being used over a period of time without anyone checking they’re still up to date. And that can create problems if it turns out you’re using contracts that have clauses in them that are out of date or no longer legally enforceable. Or they might no longer be relevant to your business. If something’s wrong, and no one is reviewing them, those errors will be replicated over and over again every time a new contract is issued. There can be additional risks too if no-one’s making sure they’re applicable to each employee’s role.
If your business was ever challenged, the employment contract is a document that’s very likely to be scrutinised and will be relied on to form part of your defence. The last thing you need is to realise only at that point that it’s inaccurate.
What should you check?
This doesn’t just apply to new contracts you’re issuing. There’s risk too if you have existing contracts that have fallen out of date. So review both. Here are some points to keep in mind when looking at your employment contracts and the templates you use:
Are you complying with recent employment law changes?
Employment law changes regularly and that’s especially true at the moment thanks to the Employment Rights Act 2025. The pace and scope of change have been considerable. For example, there’s been a raft of updates relating to day one statutory rights, such as paternity leave and statutory sick pay. There’s a real risk that if they haven’t been reviewed recently, your contracts won’t reflect the current legal situation. Breaching statutory requirements in any way could open the door to all types of problems and possible employment tribunal claims.
Are probationary periods clearly referenced?
What do your current contracts say about probationary periods? It’s essential there’s a clause included that clearly outlines the probation period and potentially gives you the right to extend it too. If an employment relationship isn’t going well, you might find yourself needing to refer to probationary period provisions in the contract so make sure it’s as watertight as possible. On the 1st January 2027, the qualifying period for unfair dismissal reduces from two years to six months, making the role of an effective probation period more important than ever.
Are restrictive clauses valid?
Restrictive clauses (or covenants) are basically terms included in contracts that restrict an employee’s activities if they leave your business. They might prevent them from working for a rival business or stop them from being able to set up their own competing business for a defined time period.
But some employers try to cover all kinds of scenarios by adding in very broad clauses to contracts. This is a risky approach that might not be enforceable in practice. If you do use restrictive clauses, make sure they’re clearly protecting a legitimate business interest, and are precise in their scope. If a court regards a clause as unreasonable, it could be overturned.
Are contracts consistent with your policies and actual working practices?
It’s also important to cross-check your contracts with your policies and procedures. Old contracts can contain references to policies and procedures that no longer exist, or the reference itself is no longer applicable. So double check that they’re consistent with each other.
Look out for any clauses that no longer reflect the reality of how you work too. Business practices can move on (the most obvious example being the shift towards more remote/hybrid working post-pandemic) and it might be that your contracts haven’t caught up. That could make it more difficult to enforce certain clauses and weaken your defence in disputes.
Is your wording clear?
A final point is to pay some attention to the way your contracts are written too. Are they actually clear and understandable to all parties? If your wording is vague then it can leave certain details open to interpretation – which can lead to challenges about what was actually meant.
Make sure your employment contracts are compliant
Might your contracts have fallen out of date? Then why not get in touch with us for an initial chat. We can help you with both checking existing employment contracts and ensuring new contracts reflect the latest employment law. You’ll find more information about how we can support you with new starter employment documents here. If you’d like to know more about how we can help you and your business, please do contact us.
