Why every small business needs proper employment contracts

A handshake and good intentions work right up until they do not. A proper written contract sets expectations on both sides and saves a great deal of difficulty if a relationship turns sour.

A contract protects both sides

A clear contract tells the employee what they are entitled to and tells you what you can rely on. It reduces arguments about pay, hours, notice and holiday, because the answers are written down and agreed.

It is also a legal requirement

Employees and workers are entitled to certain written terms, and there is a legal right to a written statement of the main terms. Beyond meeting the basics, a good contract goes further and reflects how your business actually runs.

What a good contract covers

The exact contents depend on the role, but most contracts deal with the same core ground.

• Job title, start date and place of work.
• Pay, hours and holiday.
• Notice, probation and sickness arrangements.
• Confidentiality and, where relevant, restrictions after employment.

Tailor it to the role

A contract for a part time assistant should not read like one for a senior manager. Fitting the terms to the role avoids gaps and stops you promising things you did not intend. This is where generic templates often fall short.

Common mistakes to avoid

• Relying on a verbal agreement only.
• Using a generic template that does not fit the role.
• Never updating contracts as the business changes.
• Leaving out probation, notice or confidentiality terms.

Last reviewed: 19 June 2026. Review before publishing The right to written terms comes from current employment law. Confirm the latest requirements before issuing documents.

This article is general guidance for employers. It is not a substitute for tailored HR or legal advice for your particular situation.