An employment contract is the document that sets out the terms and conditions of employment between an employer and the employee. It’s designed to protect both the employee and the employer in regards to their rights and entitlements; and while legally you don’t have to have an employment contract in place to employ an employee, if you don’t have one when there is a dispute it can make life pretty difficult.
In my opinion, the employment contract is the most important document of all employment related documents and is well worth the time and dollar investment to get it right. All too often I have heard comments like “we don’t need a contract, I know him/her;” “we are friends or we get along really well”, or “we are on the same page with how this will work”, or we’re family or we’ve worked together before.
It’s often in these situations where an employment contract is more important than ever to protect the relationship. Everything is good while the going is good! It’s when a disagreement or difference of opinion occurs that not having an employment contract in place can muddy the waters. By the time a dispute arises it’s way too late to be trying to implement an employment contract.
The accuracy and content of an employment contract is critical, otherwise it’s not worth the paper it’s written on. An employment contract is not a one size fits all employees or even all businesses because different employees within your business may be engaged under different types of employment (full time, part time or casual), or under different awards or with different terms and conditions (such as the need for a restraint of trade, tools of the trade, how overtime and penalties are applied).
Putting in place an employment contract is not as simple as googling employment contract templates; downloading it for free from the internet and inserting the company name and the name of the employer. Beware! This kind of approach is dangerous if you don’t download the right type of template, and as I mentioned earlier, it won’t be worth the paper it’s written on when things go sour. I have seen many examples of employers downloading contracts that are not at all relevant or appropriate for their business. For example, contracts of employment are different between Australia and America, there is different employment law that governs the terms and conditions of an employment agreement here in Australia compared to America. Trying to implement an American contract here in Australia can be fraught with danger. The challenge is you don’t know what you don’t know; and that’s the risk when it comes to employment law.
There are the essential things that are critical for an employment contract to include, and then there are the nice to have’s depending on your specific business operations. A contract may also reference a position description and may reference any policies and procedures that you do or don’t have in place. When downloading a free template, it’s important to ensure you are adding in the missing essential information and the relevant nice to have information. The other challenge to be mindful of is that when you start editing and / or deleting clauses in a contract, it can also change the application of the terms and conditions, so while you think changing some wording here and there or deleting a clause might seem minor, it could have flow on implications.
If you are going to use a free internet template for an employment contract here’s a couple of things to check (this is by no means a comprehensive list of what a contract should include but will give you an indication of if the contract might be applicable):
- Does it reference the correct employment legislation; the Fair Work Act, the National Employment Standards and the appropriate Award or EBA (if applicable)
- Type of employment and the relevant clauses for that type of employment
- Remuneration – detailing what is the pay rate and what is included or paid in addition regarding allowances, penalties and overtime provisions
- Hours and days of work
- Job title and duties
- Commencement date (of the contract and the original start date if you are implementing the contract post commencement of employment)
- Leave entitlements
- Termination of employment
All getting too complicated? Employment Contracts are complex and getting them right is key. Investing in having an employment contract template created specific to your business is well worth the investment to keep your business and your employees protected, and to reduce the risk of a dispute down the track.
Disclaimer: The material contained in this publication is of a general nature only. It is not, nor is intended to be, legal advice. If you wish to act based on the content of this publication, we recommend that you seek professional advice.
