Why are employment contracts necessary?
An employment contract can provide the foundation for a harmonious working relationship between employer and employees. It is a legally binding document that defines the terms and conditions of employment between both parties. Essentially, it can be seen as the road map for the employment relationship.
A clear employment agreement lets your staff know exactly what you expect of them and what consequences non-compliance will have. As it provides clarity and protection for both employer and employee, it can also prevent misunderstandings and potential legal disputes.
Which employees should sign an employment contract?
In general, all employees should sign an employment contract, be it casual employees, part-time workers or permanent staff. Naturally, the specific terms and conditions outlined in the agreement will vary depending on the type of employee you’re hiring. You may, therefore, want to prepare a range of different employment contracts, such as a casual employee contract, a permanent employee contract, etc., so you always have the right template on hand when onboarding new staff.
Related: New Hire Onboarding Checklist
What does a valid employment contract need to contain?
There are certain elements all employment contracts should contain, no matter what type of employee they’re for. These are the basic components:
Contract parties
Begin the agreement by clearly identifying the contractual parties involved. This must include the legal names of both the employer and the employee as well as their full contact details.
Job title and description
Name the employee’s job title and describe their responsibilities in detail. This should include their tasks and any expectations associated with their role. In the long term, this section will ensure accountability and provide the foundation for evaluating the employee’s performance.
Working hours and location
Specify the standard working hours and whether the role requires any shift work, flexible working arrangements or off-site assignments. Clearly defining the work location will help manage expectations from the outset.
Compensation and benefits
Detail the employee’s compensation structure, including their base salary (or hourly wage for casual workers), as well as any overtime payments. In addition, itemise any benefits you offer, e.g. bonuses or superannuation contributions beyond the legally required rate.
Probationary period
If applicable, indicate the duration of the probationary period during which your new employee’s performance will be monitored and evaluated. To ensure clarity, outline the conditions that need to be met for extending the probationary period.
Confidentiality and non-compete clauses
In these sections, address the protection of sensitive company data and intellectual property. A confidentiality clause will stop the employee from disclosing confidential information during their employment and beyond. If necessary for the specific role, also consider including a non-complete clause to restrict the employee’s permitted activities after leaving your organisation.
Termination and notice period
Clearly outline the process for ending the employment relationship and exactly how this needs to be approached by either side. Indicate the notice period required for either party and define any conduct or circumstances that may lead to immediate termination.
Grievance and dispute resolution
Establish a clear framework for resolving conflict and grievances within your organisation. List any processes you may have established, including any steps for escalating concerns and mechanisms for addressing disputes fairly and promptly.
Code of Conduct and company policies
If your company has a Code of Conduct and company policies such as anti-discrimination or health & safety guidelines, reference them here. This not only tells the employee what is expected of them but also demonstrates your commitment to maintaining a respectful and inclusive work environment.
Contract amendments
Clearly state the process that needs to be followed to make changes to the employment contract. Typically, any amendments require the consent of both parties and should be recorded in writing.
Related: How to Hire Your First Employee
Meeting legal requirements
As with any contractual agreement, you need to be certain that you meet all applicable legal requirements in your jurisdiction.
Compliance with employment laws
When drafting an employment contract in Australia, you need to adhere to the legal requirements set out by the Fair Work Act and other relevant legislation. Depending on your industry, any contract should be in compliance with the National Employment Standards (NES) and any relevant Modern Awards or Enterprise Agreements.
Seeking legal advice
If in doubt, it pays to seek legal advice. After all, crafting a robust employment contract requires an in-depth understanding of employment law and regulations. It’s, therefore, always a good idea to obtain legal counsel, so you can rest assured that your employment contracts are legally sound and tailored to your specific industry. Any lawyer specialising in employment law should be able to assist you.
Related: Employment Records: Legal Obligations and Best Practices for Australian Employers
Employee contract template
To make life easier for yourself, it’s good practice to have a basic contract template ready and expand it as needed by adding clauses relevant to your organisation and positions. Here’s an example of a basic employment contract:
Employment Contract
[Employer’s name]
ABN: [Employer’s ABN]
Address: [Employer’s Address]
Phone number: [Employer’s phone no.]
Email: [Employer’s email address]
[Employee’s name]
Address: [Employer’s Address]
Phone number: [Employer’s phone no.]
Email: [Employer’s email address]
Employee ID: [Employee’s ID]
Position: [Employee’s job title]
Commencement Date: [Start date]
Type of Employment: [Full-time/part-time/casual]
Probationary Period: [Length of probation, if applicable]
1. Salary and Compensation
The Employee will be paid a salary of [Salary Amount] per [hour/week/month], payable [frequency of payment]. This salary is subject to any statutory deductions and taxes as required by law.
2. Working Hours
The Employee’s normal working hours will be [Working Hours] per [day/week], with [breaks/lunch] provided as per company policy.
3. Responsibilities
The Employee agrees to undertake the responsibilities and duties associated with the position of [Employee’s Position], as outlined in the attached job description.
4. Leave Entitlements
The Employee will be entitled to annual leave, sick leave and any other leave as required by law and company policy.
5. Non-compete Clause
During the term of employment and for [Duration] after termination, the Employee agrees not to engage in any business activities that directly compete with [Employer’s Business] within [Geographical Area].
6. Confidentiality
The Employee agrees not to disclose any confidential information obtained during the course of employment and for a specified period afterwards.
7. Code of Conduct
The Employee shall adhere to the company’s Code of Conduct and ethical guidelines at all times during the employment term.
8. Termination
Either party may terminate this contract by providing [Notice Period] written notice. The Employer reserves the right to terminate the employment immediately for serious misconduct.
9. Governing Law
This contract is governed by the laws of [State/Territory], Australia.
10. Amendments
Any changes to the terms of this contract must be agreed upon in writing by both parties.
11. Entire Agreement
This contract constitutes the entire agreement between the parties and supersedes any previous agreements or understandings.
Both parties hereby agree to the terms and conditions outlined above:
[Employer’s Name] Date: Signature:
[Employee’s Name] Date: Signature:
Please note that you can create your custom employment contract using the Government’s employment agreement generator.
Related: The Recruiting Process for Employers: 15 Steps to Your Next Hire
In the complex world of employer-employee relationships, a well-crafted employment contract can serve as a solid foundation for a successful working relationship and prevent many issues down the track. Outlining expectations and policies in detail can foster transparency and trust in you as an employer, while at the same time safeguarding your own rights and expectations. Keep in mind, though, that you must be absolutely clear about your legal requirements and what elements a valid contract needs to contain. To this end, the template above gives you a solid foundation to build on.
