The importance of employment contracts
Why are they so important?
An employment contract is a written agreement that documents the duties and responsibilities of each party. For example, the basic duty of an employee is to complete work for an employer and for the employer to provide payment and/or benefit for this service.
Having a current, thorough, and legally sound employment contract is extremely important for both employees and employers. It sets out the relationship and provides protection for both parties interests and the employee’s specific role in the business. It should include specific details relating to the roles and responsibilities of the employee, their hours of work, remuneration, leave entitlements and many other important details.
Unfortunately, and too often, employment contracts may be out of date, not signed by one person or both parties, poorly drafted, inadequate, or simply a verbal agreement with no proper written terms and conditions. This is not recommended, as it could expose both parties to various risks.
They provide clarity
A fundamental component of an employment contract is to provide a job title that reflects the position and duties of the employee.
The job title and description will provide clarity to the employee detailing the duties they are expected to perform and in what manner. For example, an employment contract will name the position, determine the location, and define the hours an employee is expected to work. A well-drafted employment contract sets out clear obligations and expectations so that if the employee fails to meet the terms and conditions of employment the employer can rely on the contract for recourse. When each party has a good understanding of what is expected, meeting those expectations is more likely.
The employment contract also determines the remuneration and benefits the employee will be afforded for the service they provide. It should specifically describe these.
They can help manage performance and workplace behaviour
An employment contract should clearly set out what an employee is expected and required to do for their role (including performing different or alternative duties). Besides the general duties to be performed, the contract agreement should include information relating to adherence with company policies and the treatment of property.
An employment contract should also clearly set out any restrictions or prohibitions and the contract should direct them to specific company policies that describe these in more detail. Having expectations clearly defined in the employment contract can help to diminish any confusion about performance, and workplace behavioural expectations.
They can protect confidentiality and your intellectual property
During their employment, employees may have access to confidential company information, data, and intellectual property. By including confidentiality terms in an employment contract that clearly define the consequences for breach, company information can be protected. Employment contracts might also include post-employment restraints that protect the legitimate business interests of an employer. For example, employment contracts might include non-competition, non-solicitation, non-dealing, and non-poaching restrictive clauses.
Need help with talent management and employment contracts?
Our team of HR consultants can assist you with the following:
- Prepare or review your existing employment contracts and policies
- Provide advice in relation to employment matters, such as award interpretation, employment entitlements and other obligations under the Fair Work Act, and/or
- Provide performance management, disciplinary processes help manage workplace complaints as well as terminations
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