One of the common employment misconceptions we see from US businesses when setting up in the UK is the assumption that they can use an ‘at will’ contract. Navigating the UK's regulatory landscape for employer-employee relationships requires careful attention, as overlooking the requirements could expose you to legal risks and complications.

Employment contracts

The employer-employee relationship is more strictly regulated outside the US. Businesses operating this way expose themselves to legal risks as the ‘at will’ contract will be superseded by UK law. In both the US and the UK, there is a legal requirement to provide a written statement of terms. However, ‘at will’ contracts, which allow either party to terminate the employment relationship at any time without cause, are not enforceable in the UK. Instead, UK employers must follow a fair process when considering employment termination.

This fundamental difference often catches US companies off guard, highlighting the importance of making hiring decisions with intent, and only terminating employment for valid reasons.

In the UK, an offer letter is a formal communication sent by an employer to a prospective employee after they have successfully passed the interview process and met all job requirements. It serves as a legally binding contract and outlines the job offer, including salary, job title, benefits, and other terms of employment. The letter may also include any conditions that must be met before the offer becomes final.

It’s important to note that an offer letter is not the same as an employment contract. A contract of employment is a legally binding document that defines the relationship between an employee and their employer, containing explicit details about the job and employment terms.

A UK-compliant employment contract should include important information such as:

• employer’s name and address, employee details, start date, job title, and place of employment;
• details of the employee’s pay and working hours;
• holiday leave and pay;
• sick leave and pay;
• probation and notice periods;
• any other types of paid leave;
• any training that the employee is required to complete; and
• other terms and conditions, including detailed benefit offerings and references to company policies and procedures.

These terms are also described as a ‘written statement of employment particulars’. Employers are required to provide all employees and workers with a ‘written statement of particulars’ on or before their first day of employment. This includes all casual workers, bank workers, and zero-hours workers, regardless of the length of their contract.

There are very few statutory benefits in the UK, but you can add supplemental benefits to be more competitive in the current market. These benefits can serve as a powerful tool for attracting and retaining talent, and can make the difference when a candidate is comparing job roles. The UK has minimum requirements for holiday, statutory sick pay and family leave as well as mandatory Qualifying Workplace Pension ('QWP') requirements.

Employment contract templates should be reviewed annually to accommodate any changes in the law, which occur frequently in the UK. Reusing old contracts for new hires should be avoided because they may not be legally up to date.

The risk of using unenforceable or outdated employment contracts is that they can expose the business to claims via an employment tribunal and cause reputational damage. This could damage employee relations and deter talented candidates from joining the company.

For further information, read our article on ‘Five legal issues to consider when employing a person in the UK’.

How we can help

Our Foreign Direct Investment specialists support US businesses as they hire in the UK, providing advice on UK employment and attracting talent.

Our specialist HR team offers a wide range of services to assist with employee management.

We also work closely with benefits providers who specialise in working with international business. Together, we can advise on benchmarking salaries and arranging a benefits package that will help attract talent. We can also make introductions to recruitment firms specific to your market.