Directors’ Service Agreements are referred to as “Directors’ Service
Contracts” in the Companies Act 2006 but the difference is in name only.
This Director’s Service Contract – Fixed Salary contains the basic terms
and conditions which may be used by a company in employing a director. It
includes a payment in lieu of notice (PILON) provision.
This Contract covers the requirements of a Standard Form Section One
Statement. This contract complies with these requirements and must be
provided to the employee or worker by day one of employment.
This employment contract has a General Data Protection Regulation (GDPR)
compliant data processing clause. After 25 May 2018, employers must use
this clause, as employers will not be able to rely on existing generic
Previously, a version of this employment contract was available without a
PILON clause. This version has now been removed, as with effect from 6
April 2018, all PILONs, regardless of their nature, are to be treated as
earnings subject to income tax and Class 1 NICs. Click here
for more information.
An executive director, for example, a finance director or a managing
director is both an officer of the company and an employee. As such, he or
she will require an employment contract.
This Director’s Service Contract – Fixed Salary contains the following
1. Definitions and Interpretation
2. Appointment of the Executive
3. Duties of the Executive
4. Remuneration and Benefits
5. Pension and Benefits.
6. Collective Agreements
8. Other paid leave
10. Sickness and Medical Examination
11. Maternity Leave
12. Paternity Leave
13. Company Car
15. Intellectual Property
17. Non-Compulsory Retirement
18. Gardening Leave
19. Consequences of Termination
20. Amalgamation and Reconstruction
22. Staff Handbook & Employment Policies
24. Data Protection
25. Governing Law
26. Right to Work in the UK
27. Previous Agreements & Contracts
29. Supplemental Schedule: Grievance Procedures and Disciplinary Procedures
Schedule 1: Grievance Procedure and Disciplinary Procedure
Schedule 2: Data Protection Policy and Privacy Notice
This contract contains three possible restrictive covenants;
non-competition, non-solicitation of customers and non-solicitation of
employees. The non-competition clause provides that for a period of time
after termination of employment the employee will not compete with the
company’s business. The non-solicitation clauses provide that for a period
of time after termination of employment the employee will not deal with the
company’s customers (with whom the employee has had dealings) and can’t
poach employees of the company.
It is important that the restrictive covenants are no wider than is
necessary to protect your “legitimate business interests”, otherwise they
may be unenforceable. Please consider each restrictive covenant carefully,
and remove any that are not relevant to your particular business and to the
individual in question. For those remaining, insert time limits and
geographical limits that are appropriate and reasonable to the nature of
Please note that if the clause is tailored to match the particular
individual it is more likely to be deemed reasonable and therefore more
likely to be enforceable. Using identically worded restrictive covenants
for different employees without tailoring them to the individual may
encourage a court to interpret the restrictive covenants as unreasonable.
A copy of every Director's Service Contract must be open to inspection with
the company under section 228 of the Companies Act 2006 either at the
company’s registered office or at the single alternative inspection
location permitted under the Act (in the latter case, the company must
notify the Company Registrar of the location of the Service Contracts). The
copies must be retained by the company for inspection for at least one year
following the date of termination or expiry of the Service Contract.
Under section 188 of the Companies Act 2006, Directors’ Service Contracts
with a guaranteed term which is (or may be) longer than 2 years must be
approved by an ordinary resolution of the shareholders of the company.
Determining the length of the guaranteed period is subject to complex
rules. The guaranteed term of a director’s employment is either:
(a) the period (if any) during which the director’s employment continues
(or may be continued) except at the option of the company (whether under
the original agreement or under a new agreement entered into in pursuance
of the original agreement), and it cannot be terminated by the company by
notice, or it can be terminated only in specified circumstances, or
(b) in the case of employment which can be terminated by the company by
notice, the period of notice required to be given. If the employment has a
period within paragraph (a) and a period within paragraph (b), the
aggregate of those periods will be the guaranteed term.
If the company enters into a further service contract more than six months
before the end of the guaranteed term of a director’s employment (except
where the original contract gives the other party that right), then the
unexpired period of the guaranteed term of the original contract will be
added to the guaranteed term of the new contract.
This contract includes terms relating to the retention of the Director on a
fixed salary. Where a contract with remuneration on a bonus scale scheme is
required, please use “Director’s Service Contract - Including Bonus Share
Clauses with optional and alternative phrases
Options and alternatives appear in blue font. The way in which this
document is designed ensures that it will make sense with or without the
optional clauses. Tailor this contract by removing all phrases and clauses
which are not relevant to your business. Once you have finished, please
remember to highlight the whole document and switch the font colour to
This contract is in open format. Fields should be completed where
indicated. Wording in square brackets is optional and can be deleted or
retained according to requirements.