Employment contract for someone moving from contractor to employee

A contractor who becomes an employee brings a history with them: work that may or may not belong to the business, a period that may count as employment already, a day rate that does not translate into a salary, and a contractor agreement that has to be ended properly. The employment contract has to set the start date and record the position on continuity, confirm the ownership of the work already done, set pay and benefits the person will accept against what they earned as a contractor, and contain the terms (notice, covenants, confidentiality) that the contractor agreement may never have had. I draft that contract for the employer for a fixed fee of £595, delivered in five working days, with the ending of the contractor agreement dealt with in the same documents.

Who this is for

Employers in England and Wales taking a long-standing contractor or freelancer onto the payroll, whether because the role has become permanent, because the status was never secure, or because the person asked.

What matters when a contractor becomes an employee

Why the move and what the law already thinks the person is

A contractor who has worked for one business for years, at its direction, on its systems, with no real right of substitution, may already be an employee or a worker in law, with the rights that follow, and HMRC's Check Employment Status for Tax tool and the off-payroll rules may already treat the engagement as employment for tax; the conversion regularises the position, and the contract should be drafted knowing that the business may be recognising a status that already existed rather than creating one, which affects continuity, back pay and the terms the person will accept.

The start date, continuity and the history that comes with them

The contract should state the start date of the employment and should take a position on continuity: if the business accepts that the person was an employee throughout, continuous employment under the Employment Rights Act 1996 runs from the original start, with the service that gives unfair dismissal and redundancy rights already accrued; if it does not, the contract states that employment starts on the conversion date and that the previous engagement was a contract for services, which the person may contest; the position affects the probation clause (which is inappropriate for someone with years of service), the notice period and holiday accrual, and the business should decide it with its eyes open rather than by default.

The work already done and who owns it

Work created by a contractor belongs to the contractor unless assigned, under section 11 of the Copyright, Designs and Patents Act 1988, whereas work created by an employee in the course of employment belongs to the employer, so the conversion is the moment to obtain a written assignment of everything the person created during the contractor period, with moral rights waived, under section 90 of that Act; the contract should contain the assignment or refer to a separate deed, because a business that has had its product built by a contractor who was never asked to assign it does not own its product.

Pay, benefits and the comparison with the contractor's rate

A day rate includes the contractor's holiday, sick days, pension, employer's national insurance and risk, and the salary offered will be lower than the annualised rate, which the business should be ready to explain by setting out the benefits the employee receives (paid paid holiday under the Working Time Regulations 1998, statutory sick pay under the Social Security Contributions and Benefits Act 1992, the workplace pension the Pensions Act 2008 requires, notice, employment protection) alongside the salary; the contract states the package, and the conversation about the rate is the business's to have before the contract is sent.

Ending the contractor agreement cleanly

The contractor agreement should be terminated in writing with effect from the day before the employment starts, with final invoices settled, any notice period waived by agreement, the contractor's company (where there is one) released and its obligations (confidentiality, IP, return of property) confirmed as surviving, and a mutual confirmation that nothing is owed under the contractor agreement; where the status of the previous engagement is in doubt, the business may want a settlement of any claims arising from it, which requires a settlement agreement with independent advice rather than a clause in the employment contract.

The new terms, covenants and the particulars

The contract supplies the written particulars under section 1 of the Employment Rights Act 1996 from the first day of employment, sets notice with section 86 as the floor (and the service already accrued if continuity is accepted), introduces confidentiality, restrictive covenants and the handbook that the contractor agreement may never have contained, states hours, place of work and any hybrid arrangement, and addresses equipment and accounts the contractor supplied themselves; covenants introduced on conversion are supported by the employment as consideration, and the Employment Rights Act 2025 changes to the early months of employment should be considered on the timetable the regulations set if the business treats the employment as new.

What it costs

Employment contract, £595. One template you can reuse for a grade of staff. Five working days.

Staff handbook and core policies, £995. Five working days.

Buying online forms the engagement on payment. The scope is what the employment contracts and handbooks page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• A bespoke contract drafted for how you employ people
• Restrictive covenants drafted at a scope a court will uphold
• Confidentiality and intellectual property provisions that put ownership where it belongs
• The statutory particulars, so the document does the job section 1 of the Employment Rights Act 1996 requires it to do
• Flexibility clauses where you genuinely need them, drafted to survive challenge
• Core policies: disciplinary, grievance, sickness absence, equal opportunities, data protection and, increasingly, AI use
• One round of amendments

What is not included

• Acting for employees
• Employment tribunal representation
• Payroll, pensions auto-enrolment and tax
• Immigration and sponsor licence work
• Day to day HR handling, disciplinaries, grievances and redundancy processes

Questions I am often asked

Our contractor has worked for us for four years. Does their employment start now?

That is the business's decision to take with its eyes open: if it accepts that they were an employee throughout, service runs from the original start; if not, the contract says employment starts now and the contractor may contest it. The contract records whichever position is taken.

Do we own the work the contractor did before we employed them?

Only if they assigned it, which contractor agreements often omit. The conversion is the moment to obtain a written assignment, which the contract contains or refers to.

Can we put a converting contractor on probation?

Probation is inappropriate for someone the business has worked with for years and sits badly with a claim that employment is new. The contract omits it unless the business has a reason, which it should be ready to explain.

Related guidance and services

• Employment contracts and handbooks, £595, the service this page describes
• Consultancy and contractor agreements, £595
• Settlement agreements for employers, £795
• Converting a contractor to an employee
• Consultancy agreement versus employment contract: which one you need

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: October 2026. Email geoffrey@caesar.co.uk.