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What to include in an employment contract

An employment contract is a legally binding agreement between you and your employee. It sets out the ground rules of the relationship, and the rights and obligations of each party. 

It's designed to give you and your employee security and protection. Certain conditions must be met for it to be legally recognised. These include:

  • It is an offer of employment that has been accepted by the prospective employee

  • It shows consideration by each party in return for the obligations undertaken by the other party

  • It is an intention by the parties to enter into a legal relationship

  • The agreement is certain and complete

  • It limits your risk as an employer by providing proof as assistance when resolving workplace disputes.

Drafting a clear and detailed employment contract

Provide clear written agreements with all necessary details so your employee is fully aware of their obligations and has agreed to comply with the stated terms. Oral agreements are difficult to prove in cases of doubt or if contested. 

An employment contract typically includes:

  • name of the employer

  • title of the job to be performed by the employee

  • employment commencement date

  • basis of the employment (ongoing, fixed-term or casual), and, if applicable, the period of employment

  • hours of work, and, if applicable, a schedule of employment

  • leave entitlements such as personal leave and annual leave

  • pay, including amount of the employee’s remuneration and how it’s made up – overtime, award payments, penalties and non-wage monetary entitlements

  • performance requirements including any applicable commission or bonus schemes

  • minimum period of notice by both employer and employee to end the relationship

  • employee compensation entitlements in the event of termination

  • confidentiality, technology and privacy policies.

Include an enforceable and valid restraint

By building this into your employee's contract, should an ex-employee poach clients or steal confidential information, it will be a breach of their contractual obligations. If you ever need to rely on it to enforce a former employee’s obligations, a court will consider the reasonableness of the restraint at the time the contract was entered. 

Broadly put, restraint of trade clauses are enforceable to the extent that they are “reasonably necessary” to protect the “legitimate business interests” of the employer. The law will, for example, protect an employer’s trade secrets, confidential information, customer connections and staff relationships. However, the law can’t protect an employer against simple competition from a former employee.

Protect your IP, client base and confidential information

Typical inclusions for confidentiality:

  • enforceable non-compete, restraint of trade (explained below), and non-solicitation clauses to protect your legitimate commercial interests, other employees as well as your customers

  • geographical radius (not considered too restrictive), or a time period (not considered too excessive) in which the employee cannot work

  • poaching of clients where they have deemed the clients of the business

  • poaching or soliciting of other employees

  • restrictions on advertising for a timeframe prohibiting the solicitation of clients and staff from a place of employment for a specific period of time

  • theft or misuse of intellectual information whereby the employment contract is protecting client details, specifically service records and personal contact details.

Note: A non-compete clause is designed to protect a business owner’s investment by limiting an employee from competing with a business that previously employed them.

Understand fixed-term employment contracts

An employer may commonly hire employees under what's referred to as 'fixed-term employment’ contracts. This arrangement is often designed to circumvent a company's restriction on employing additional permanent employees in a particular part of the business.

However, this can create problems for the employer. In certain circumstances, an employee's employment status may not accurately reflect the nature of the employment relationship with the employer.

My Business Workplace has all the recruitment resources and employment agreements you need to recruit. 

Your HR sidekick

From contracts of employment to letters of termination and everything in between, My Business Workplace has got you covered.

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