When employing new staff we all start with the best intentions of having a successful professional relationship. Both parties are excited to work together and are keen for each other’s success. It’s important to ensure that there are formalities in place that define the professional relationship for clarity and agreed working terms.
An employment contract can help legally define the relationship between the employee and the employer. This sets up the employment of a new team member in the right way.
Both parties have to agree to and sign the written contract before the new hire can start working, and helps to align the partnership so everyone is on the same page.
A written employment contract addresses several important aspects of the relationship between the business and each employee. It helps to minimise misunderstandings of performance and remuneration issues that might arise.
Here are some of the benefits of an employment contract:
- Written employment contracts provide proof of the terms of the employee relationship with the business
- The contract will clearly explain the responsibilities of the employee as well as their compensation and benefits.
- When employment contracts are in writing, it is easier to handle issues that are related to breach of contract.
What is Contained in an Employment Contract?
Although every employee contract will vary depending on the role, there are many standard features.
Here some of the typical clauses in an employment contract:
Role & Responsibilities
This part of the contract explains the basic job responsibilities of the employee. It may also state the goals the business expects to be met or specific projects for which the employee is responsible.
Work Hours & Schedule
This will detail how many hours each week an employee will work, and may provide a time that the employee is expected to report to work each day. It can also address whether the employee is required to work or be available to work on certain holidays, or be on-call at certain times. There may also be flexible work-from-home benefits for certain employees.
Payment Terms
This may include and isn’t limited to whether the employee will be paid hourly or be a salary employee. It will also detail whether the employee is entitled to overtime pay, and if the employee receives a commission or other forms of compensation.
Employee Entitlements
The type of entitlements the employee receives will vary depending on the industry. Entitlements include superannuation, sick leave, and annual leave. Other allowances may also be included such as mobile phone, home office, training and transport.
Non-Compete Clause
In many industries a non-compete clause can be added to prevent employees from working in a competing capacity for a certain amount of time after their employment contract ends. The contract will also have a statute that explains how long this clause may be in effect as well as any geographic restrictions related to the clause.
Non-Disclosure Clause
A non-disclosure clause may also be known as a confidentiality clause. This clause explains that the employee who signs the contract is not authorised to reveal any company information they learn during the course of their employment.
How To Setup an Employee Contract
Many businesses do not have the resources or experience to write their own agreements or contracts. For this reason, business owners should seek professional help in creating contracts that are legally binding. There are many companies that can assist with providing employment contracts depending upon your industry. Also, some industry associations have a human resources department that often provides sample template contract agreements.
Once you have the contract drawn up, it is important to review the document together with your new employee.
After all terms on the contract are understood and agreed, both the employee and employer should sign the contract. At certain times, such as during performance reviews, it might be necessary to revisit and make some amendments.
Setting Your New Team Member Up For Success
The benefits of an employee contract don’t just extend to the company. They also assist the new team member in having a clear set of parameters to work from.
If working conditions are not clear from the outset, there can be grey areas that can cause confusion and mismatched expectations and other employment issues down the track. While it might be tempting to trust new employees to do what is right, there can be misunderstandings that a clear employee contract can help to clear up and realign the employment relationship.