5 Legal Mistakes Small Businesses Make with Staff Contracts (and How to Avoid Them)

5 Legal Mistakes UK Employers Make with Staff Contracts (and How to Avoid Them)

Staff contracts might seem like just another admin task, but getting them wrong can be costly. From legal risks to damaged employee relationships, mistakes in contracts can lead to serious headaches for UK business owners. The good news? These mistakes are avoidable - as long as you know what to look out for.

Here are five of the most common legal mistakes small businesses make with staff contracts and how you can steer clear of them.

1. Not Giving a Written Contract

The Mistake:

Believe it or not, some UK employers still don’t provide written contracts at all. A verbal agreement might seem like enough, but it’s a legal requirement to provide a written statement of employment particulars by day one of employment.

The Risk:

Without a contract, disputes over pay, hours, holidays, and job responsibilities can become messy. It also makes it harder to enforce key protections, like notice periods or confidentiality clauses.

How to Avoid It:

✅ Provide a written employment contract on or before the employee’s first day.
✅ Use a clear, legally compliant template to cover all essential terms (check out my resources at the bottom for an easy, compliant solution).

2. Using Free or Outdated Contracts

The Mistake:

Many business owners turn to free or outdated contract templates to save time and money. However, these contracts often don’t comply with current UK employment laws or fail to include key protections for your business.


The Risk:

Using a poorly drafted contract can leave you legally exposed if disputes arise over working hours, restrictive covenants, or termination processes. It can also result in costly claims if important clauses are missing or unenforceable.

How to Avoid It:

✅ Use legally compliant, up-to-date contracts tailored for UK employment law.
✅ Regularly review and update contracts to ensure they reflect current legal requirements.
✅ Get professionally written templates from a trusted provider 

3. Not Getting a Signed Copy Back and Keeping It Safe

The Mistake:

Providing a contract is one thing—but failing to get a signed copy back or storing it properly is another common mistake. Some businesses rely on verbal agreements or assume an unsigned contract still holds legal weight.

The Risk:

If an employee disputes their contract terms and you don’t have a signed copy, it can be difficult to enforce key clauses like notice periods, confidentiality, or restrictive covenants. Lost contracts also make it harder to track employment agreements and obligations.

How to Avoid It:

✅ Always require employees to sign and return their contract before starting work.
✅ Store contracts securely—whether digitally or in a HR system.
✅ Regularly audit employment records to ensure all contracts are signed and accessible if needed.

4. Not Including Key Legal Clauses

The Mistake:

Some contracts miss out critical legal clauses, leaving employers exposed when things go wrong. Essential protections like confidentiality, intellectual property, restrictive covenants, and disciplinary procedures are often overlooked.


The Risk:

Without these clauses, employees could take confidential business information, poach clients, or dispute company policies. In the worst-case scenario, an employee leaving your business could take valuable knowledge to a competitor.

How to Avoid It:

✅ Ensure contracts include key clauses like:

  • Confidentiality (to protect sensitive business info)

  • Intellectual property (to clarify ownership of work)

  • Restrictive covenants (to prevent unfair competition)

  • Disciplinary & grievance procedures (to stay legally compliant)

5. Making Changes to Contracts Without Employee Agreement

The Mistake:

Many employers assume they can update an employee’s contract whenever they like, but changes to employment terms must be agreed upon by both parties. Simply announcing a change to hours, pay, or job roles without consultation can lead to legal claims.

The Risk:

Unilateral contract changes can result in grievances, resignations, or even unfair dismissal claims. Employees can also refuse to sign or comply with new terms, creating unnecessary disputes.

How to Avoid It:

✅ Consult with employees before making changes.
✅ Offer clear justifications and discuss options openly.
✅ Provide written confirmation of any agreed contract changes.

To Sum Things Up

📑 Getting staff contracts right isn’t just a legal necessity—it’s a key part of protecting your business and building trust with your employees.

Avoiding these common mistakes will help you stay legally compliant, set clear expectations, and create a smoother working relationship from day one. 🚀 By avoiding these common mistakes, you can prevent legal issues, create clear expectations, and ensure your team starts on the right foot.

Resources

💡 Free Guides & Tools

🛠️ Paid Resources & Support

  • Contract Templates – Ready-to-use, legally compliant redundancy documents.
  • HR Advice - Got questions about staff contracts? Pick my brains and choose either 30 or 60 mins with me via Zoom to get your questions answered. 

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