Jan 28, 2023

3 Fundamental Clauses in an Employment Agreement

The key clauses of an employment contract employers need to know about.


A comprehensive employment agreement protects the interests of both the employer and the employee. Alternatively, if the terms of the employment agreement are not set out clearly the parties risk conflicts due to ambiguity. This article will look at 3 fundamental clauses that characterise employment agreements.


A key clause in an employment agreement is the pay clause (also known as the salary clause). An employer has to compensate the employee for their labour. The pay clause will set out the terms of such compensation.

Firstly, it will state the type and rate of pay the employee will receive. The two most common types of employee payments are periodic salaries and hourly rates.

Secondly, the clause will set out the date and frequency of payment. For example, the employer could pay on the first day of each month or the first Monday of each week.

Thirdly, the clause will determine the method of payment, i.e. how will the employee receive their payment. Normally, this will be in arrears to the nominated account. Finally, the clause will lay out other important information such as the salary review and deductions procedures.

Hours of work

A second integral clause in an employment agreement is the hours of work clause. The clause will set out the hours per day and days on which the employee is required to work. It also states the employees entitlement to overtime pay, the rate of overtime pay and the limit of hours the employee can work in accordance with the working hours regulation.

An employee cannot work for more than an average of 48 hours per week taken over a period of 17 weeks according to the Working Time Regulation 1998, unless they opt-out. Finally, it will show the employees right to a break and the conditions of such break, such as duration and whether or not it is paid.


Another central clause in an employment agreement is the holiday clause. An employee in the UK is entitled to 28 days of holiday. It is within the employer’s discretion to increase the annual holiday entitlement of an employee and whether or not to include public and bank holidays in the entitlement.

The holiday clause will state the annual entitlement of the employee and whether or not it is inclusive of public and bank holidays. The clause will also set out the employer’s holiday year and the procedure for taking holidays. Additionally, the clause will determine the condition of carrying over holidays from one year to the next.

Finally, the clause will outline the treatment of untaken holiday entitlement after a notice has been served by either party, this could either be a payment in lieu of untaken holiday or requiring the employee to take these days during the notice period.

In conclusion, the employment contract should clearly set out the terms on which the employment is going to take place. A comprehensive employment contract will regulate many aspects of the relationship between the employer and their employees. Key among these aspects are pay, hours of work and holiday.

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