What is an Employment Contract?
An employment contract is an agreement between an employer and employee that sets out terms and conditions of employment.
Employment contracts can be written or verbal.
We recommend you always get a contract in writing to avoid misunderstandings and disputes later down the track.
What does an Employment Contract include?
An Employment Contract should contain the following information:
Details of the position the employee is being hired for should be clearly stated. The position description within the contract should outline the basis of employment (permanent, fixed-term or casual), start date, duties, place of work (e.g., from home or in office), manager and whether these duties can be altered.
This refers to the amount and frequency you’ll pay your employee and whether that is salary or hourly, and if it includes a bonus or other structure. Your business may also offer a share scheme as part of an employee’s remuneration.
Ordinary Hours of Work
The employment contract should specify regular hours per week, including days and times, and paid or unpaid breaks. Please note, a casual has no guaranteed hours of work or expectation of ongoing work in the future.
Depending on the nature of employment, such as casual or permanent, there are different leave entitlements. Generally, permanent employees receive minimum leave entitlements such as long-service leave, sick leave, annual leave and carer’s leave. You can offer employees more than the minimum entitlements, but not less.
You should have a clear procedure for termination of your employee, including minimum notice periods for both parties. Under law, there are minimum notice periods which change depending on the type of employment and length of employment, so if you’re unsure, you’ll want to get legal advice.
Depending on the type of employment, and the choice of your business, you may want to specify a probation period. It’s important to put this in writing so that everyone is clear about when the period starts and stops. The courts have generally accepted that a reasonable probationary period is between 3 to 6 months.
It’s important to protect your confidential information from being leaked or used in competition to you. This clause usually talks about the types of information which must not be shared during or after employment.
Your intellectual property is valuable because it represents the intangible assets of your business. This includes things like know-how, business processes, designs, content and more. This clause is also important because you’ll want to make it clear that any produced by an employee during the course of work is owned by the company.
A restraint of trade clause helps to protect your business interests. It prevents the ex-employee from soliciting or approaching your employees, contractors, clients and customers after they have ceased employment with your company.
Keep in mind that restraints of trade are only enforceable if you can prove that the restraint is necessary to protect your legitimate interests. This may not be the case if the restraint runs for an excessive period of time, covers a geographical area that is too broad, or extends beyond the industry in which you primarily operate.
As an employer, it is your responsibility to pay at least the minimum wage and entitlements as set out in the the National Employment Standards (NES) contained in the Fair Work Act 2009 or the relevant award, enterprise or other registered agreement.
There are more than 100 industry or occupation Awards that cover most people who work in Australia. An employer can be covered by more than one award depending on the jobs the employees do.
You can use the Find My Award tool to check for award coverage on the Fair Work website. In some cases there may not be an award that covers your industry/job role (this is known as “award-free”).
If you are unsure about the status of an employee, you should seek legal advice.
Why You Need An Employment Contract
The most important reason for having a solid employment contract is to clearly state the rights and responsibilities of each party. A written contract will help avoid confusion about what the employee must do as part of their employment.
It also protects the business by having a document to refer to in the event that an employee disputes their role or entitlements during the course of employment.