7 Things you Should Include in an Employment Contract
Contracts are a vital part of every business. Whether you initiate a franchise or tie up with a supplier, contracts help you legally govern the deal. Likewise, an employer-employee relationship is also governed by a contract known as an employment contract. An employment contract provides employees their job details and other conditions governing their employment. Elements of an employment contract allow employees to work in a lawful and smooth manner. It also helps you ensure they work in accordance with the organisation’s work policy. These features of an employment contract include details governing organisation’s work and leave policy, pay and incentives, confidentiality terms, and more. If you are a new business seeking new hires, then these employment contract basics will help you in drafting one.
- Employee Classification
Organisations hire employees on a full-time as well as a contractual basis. Your employment contract must specify the type of employee it is addressed to. It must mention whether the new employee is on a full-time or a contractual basis. This helps prevent confusion in terms of job responsibilities and also prevents costly lawsuits due to misclassification.
- Job Title and Responsibilities
Employees must be told the reason they are hired for. Hence, the employment contract must include their job title and description. The description need not be an exhaustive list of their duties. A simple and accurate description of what and how they are expected to work will suffice. Additionally, you must mention their performance review and appraisal details including the procedure and how they can benefit from it.
- Work Hours and Schedule
Depending on the type of employee, full-time or contractor, the date of joining and work hours must be specified in the contract. This includes the required hours and the number of days per week they are expected to work. Additionally, mention the flexible working options like work-from-home or telecommuting if any.
- Salary and Benefits
Employee pay and benefits are vital inclusions of an employment contract. However, they must be done in legal compliance. Apart from mentioning the salary figure, you need to specify whether you are paying them on a monthly or a weekly basis. It must also outline details of how and when the employees are entitled to bonuses and incentives. You should also mention details of additional benefits offered by your organisation including retirement, insurance, medical, and fringe benefits if any.
- Paid and Sick Leave Policy
An employment contract must mention the paid time-off and sick leaves offered as per your organisation’s policy. Depending on the type of the employee, you must outline the number of paid and sick leaves they are entitled to. Also, explain your expectations regarding the same and the consequences of leaves taken in addition to these.
- Confidentiality Terms
Businesses work on confidentiality. Protecting sensitive information like trade secrets, intellectual property, and client data are vital for a business. While confidentiality or non-disclosure agreement can be separate, you can create the section in the employment contract itself. You must mention these terms and the consequences if not adhered to in this section.
- Termination Details
Details regarding termination must be specified in the employment contract. This includes grounds on which you are entitled to dismiss the employee and notice period to be served if they wish to resign. You must also mention privacy terms to be followed by the employee once they leave the organisation.
While these employment contract basics provide a start point to draft a contract, you can add more details depending on the type of your business. In case you need any help, then hiring an attorney will be beneficial in drafting an accurate employment contract best suited to your situation.