When employers think about employment contracts, they usually think about the written document. The offer letter, the contract of employment, the staff handbook, the policies and any signed variations. That is understandable. Written terms matter. They give both sides clarity about pay, hours, notice, holiday, responsibilities and workplace expectations.But the written contract is not always the whole story.
In employment law, some terms can become part of the employment contract even if they have never been written down. These are known as implied terms. They may arise because they are necessary for the contract to work, because the law automatically requires them, or because a workplace practice has become so established that it is treated as part of the employment relationship. That last category is often where employers are caught out.
What Are Implied Terms in an Employment Contract?
Implied terms are terms that form part of the employment contract even though they are not expressly written into it. Some are implied by fact. These are usually terms needed to make the contract work properly. For example, if an employee is employed as a delivery driver, it may be implied that they need to hold a valid driving licence, even if that has not been clearly written into the contract. Some are implied by law. These apply because of the nature of the employment relationship or because legislation says they apply.
They include duties such as mutual trust and confidence, the employee’s duty of fidelity, and statutory protections around areas such as national minimum wage and working time. Then there are terms implied through custom and practice. This is different. It is not about what the contract needs in order to function. It is about what the employer has actually done in practice.
What Does Custom and Practice Mean in Employment Law?
Custom and practice is one of those phrases that sounds more complicated than it is. In simple terms, it means that if an employer does something consistently, clearly and over a long enough period of time, employees may reasonably start to believe that it is part of their terms and conditions. In some cases, that expectation may become legally significant. The usual test is whether the practice is reasonable, notorious and certain. That wording is not always helpful in plain English, so it is worth breaking down. “Reasonable” means the practice must make sense in the circumstances and be capable of being understood as part of the employment relationship. “Notorious” does not mean dramatic or scandalous. It means the practice is well known, recognised and understood by the relevant employees. “Certain” means the practice is clear enough to identify.
A vague expectation is much harder to rely on than a regular, specific arrangement. So, custom and practice is not normally created because a manager made a one off decision, an employer showed kindness during a difficult period, or a temporary arrangement was agreed for one individual. The risk grows when the same thing happens repeatedly, without clear qualification, and employees come to understand it as something they are entitled to receive.
Examples of Custom and Practice at Work
Custom and practice can arise in many everyday workplace situations. A common example is bonus payments. If a business pays a Christmas bonus every year, in the same way, to the same category of employees, without making clear that it is discretionary, employees may argue that the bonus has become contractual through custom and practice. The same issue can arise with enhanced redundancy payments, additional sick pay, paid breaks, early finishes, travel time, overtime arrangements, flexible working patterns or enhanced holiday arrangements. The difficulty for employers is that these practices often begin for perfectly good reasons.
A business may want to reward staff after a strong year. A manager may allow an early finish on Fridays because the workload is quieter. An employer may pay enhanced sick pay during a difficult personal situation. A team may fall into a particular working pattern because it suits everyone at the time. None of that is automatically a problem. The problem comes when nobody stops to ask whether the arrangement is temporary, discretionary, role specific or now part of the wider employment relationship. Over time, silence can create confusion. Repetition can create expectation. Expectation can create dispute.
Why Custom and Practice Can Create Employment Contract Risk
Custom and practice is important for HR teams, managers and business owners because it sits in the gap between what the contract says and what actually happens in the workplace. A well drafted contract will not protect an employer if day to day practice tells a completely different story. If managers consistently approve something, pay something, allow something or communicate something as normal, employees may rely on that behaviour. That does not mean employers should become rigid or stop using discretion. Good employment relationships need judgement, flexibility and humanity. But flexibility should be managed carefully.
If something is discretionary, say so. If something is a one off exception, confirm that clearly. If a benefit is non contractual, make sure the contract, policy or communication says that. If a temporary arrangement is introduced, give it a review date. If managers are making decisions that affect pay, hours, leave or benefits, make sure they understand the contractual risk of repeating those decisions without proper wording. This is especially important in growing businesses, where informal habits can quickly become “the way we do things here”.
In a small team, arrangements are often agreed casually. Everyone knows each other, decisions are made quickly and there may be very little paperwork. That can work for a while. But as the business grows, those informal arrangements can become harder to manage. New employees may compare terms. Managers may apply practices inconsistently. Employees may challenge a change if they believe something has become an established right. That is when employers often discover that the issue is not what they intended. It is what their conduct appeared to create.
Can a Workplace Practice Become Contractual?
A workplace practice may become contractual if it is clear, consistent, well known and repeated over time. For example, an employer may never have intended enhanced redundancy pay to be contractual. But if it has paid the same enhanced formula every time redundancies have happened, across several years, and staff know about it, there may be an argument that the practice has become implied into the contract.
Equally, if employees have always been paid for a particular break, always allowed to finish early before a bank holiday, or always received a particular allowance, removing that arrangement without consultation may create risk. The practical point is not that every workplace habit becomes contractual. It does not. Each situation will depend on the facts. The point is that employers should not assume that something is safe simply because it is not written down. If anything, the absence of writing can make the position more uncertain.
How Employers Can Manage Custom and Practice
A good starting point is to review the gap between the contract and the reality. Look at what actually happens in the business. How are bonuses described? How is overtime handled? Are enhanced payments made consistently? Are managers promising things informally? Are staff receiving benefits that are not reflected in the contract or handbook? Are different teams operating under different assumptions? Once those practices are identified, the employer can decide what to do with them. Some may need to be formalised because they are genuinely part of the employment offer.
Some may need clearer wording to confirm they are discretionary. Some may need to be phased out carefully, with proper communication and, where required, consultation. Some may simply need better manager guidance so that future decisions are made consistently. This is where HR documentation becomes more than admin. Contracts, policies and letters help create boundaries. They help managers understand what they can agree. They help employees understand what they can rely on. They reduce the risk of good intentions turning into unclear obligations.
Why Written Contracts Still Need to Match Workplace Reality
Custom and practice is really a reminder that employment contracts are lived, not just filed away. What matters is not only what the employer wrote at the start of employment, but what the employer has repeatedly done since. For employers, the safest approach is to be clear, consistent and deliberate. If something is contractual, document it properly. If something is discretionary, say so clearly.
If something is temporary, put a timeframe around it. If something is changing, handle it carefully rather than assuming it can simply be stopped. The written contract still matters. But so does the culture of decision making around it. Because in employment relationships, habits can become expectations. And sometimes, expectations can become rights.
If you want to make sure your written terms reflect how your business actually operates, our bespoke contracts of employment service can help you create, review and update contracts that are tailored to your business and your employees.