One of the most significant, and least discussed, risks facing UK businesses is the reliance on outdated or generic employment contracts that no longer meet legal requirements or adequately protect the organisation. This issue affects businesses of all sizes and is particularly acute as the Employment Rights Act 2025 introduces further changes. This article sets out the key contractual provisions employers should have in place, what the audit process requires, and what the consequences are for businesses whose contracts fail to provide sufficient protection.
What This Means for UK MSP and Tech Businesses
Employment lawyers regularly see businesses relying on standard contracts that have not been updated in years, or contracts that do not cover the legal requirements or protect the business adequately. In the fast-moving world of UK employment law, a weak contract is more than a paperwork issue; it is a significant commercial risk.
The Quick Contract Audit Checklist
Review your senior and key staff contracts against the following five areas.
- Intellectual Property (IP): do you have express clauses ensuring all work created during employment belongs to the company? (Implied terms are not always sufficient for complex roles.) The clause should accurately define the types of intellectual property covered and adequately assign those rights to the company.
- Restrictive Covenants: do you have tailored non-compete, non-solicitation, and non-dealing clauses? (Overly broad restrictions are legally unenforceable.)
- Commission and Bonus: is it clearly stated that payments are discretionary and that no payment is due if the employee is serving notice?
- Garden Leave: do you have the express right to exclude an employee from the office during their notice period whilst continuing to pay them? (Without this clause, you may be required to allow them to remain in post.)
- Data Protection: have your contracts been updated to reflect UK GDPR requirements, with a reference to your staff privacy notice?
Scoring Your Contract Audit
Use the scoring guide below to assess the level of protection your current contracts provide.
4-5 areas covered: your contracts are likely in good shape, but restrictive covenants should be reviewed every 12 to 24 months to ensure they continue to reflect the employee's current seniority and the business's evolving needs.
2-3 areas covered: you have some basics in place, but material gaps remain. Without a garden leave clause, for example, you may be unable to keep a departing salesperson away from your client list during their notice period.
0-1 areas covered: your business is significantly exposed. You may have insufficient protection for trade secrets, client relationships, and intellectual property if a key member of staff departs.
Next Steps Following Your Audit
If your audit has identified gaps, the following actions should be prioritised.
- Review seniority: avoid applying a one-size-fits-all approach to both junior staff and directors. Contractual protections must be proportionate and role-specific to be enforceable.
- Update for 2026: ensure your data protection and IP clauses reflect current digital working practices and comply with the changes introduced by the Employment Rights Act 2025.
- Legal health check: instruct a qualified employment lawyer to review your contract templates and confirm they are enforceable under current UK case law.
Why Work with a Specialist Employment Lawyer
A qualified employment lawyer can identify and resolve contractual weaknesses before they become costly disputes.
- Draft or update tailored restrictive covenants that are proportionate and enforceable under current UK case law.
- Ensure IP assignment clauses accurately reflect the scope of the employee's role and the business's requirements.
- Review commission and bonus documentation to eliminate ambiguity and reduce tribunal risk.
- Advise on the Employment Rights Act 2025 and its implications for existing contract templates.
Strengthening Your Employment Contracts Before It Is Too Late
Businesses should be aware of the risks posed by outdated or inadequate employment contracts and begin reviewing their documentation now. Ensuring your contracts are legally compliant and fit for purpose is not optional, it is a legal and commercial obligation that becomes increasingly critical as the Employment Rights Act 2025 takes full effect.
Contact our team to discuss your employment contracts and employment law requirements
