The importance of employment agreements
An employment agreement, sometimes called an employment contract, is a contract between an employee and employer that outlines employee roles and responsibilities. This agreement can be written or verbal, but we suggest utilising a written version so you have something clearly outlined you can refer back to later, if needed. This also reduces the chances of miscommunication or misunderstanding about the role from either party.
Do you really need one?
Legally, no you don’t. But, many savvy business owners would say this agreement is crucial (although sometimes overlooked by smaller businesses). This document clearly defines your employee’s duties, helping them understand their tasks. As the employer, it also gives you a framework for determining how they’re performing in their role.
What to include
Employment contracts should be tailored to suit the circumstances of your business, as well as the uniqueness of the role. For example, an employment contract for an entry-level intern will be different than one for your company’s manager. Although the content of the agreement will vary, there are six main areas that you should consider.
1. Essential details of employment.
This might include expected work hours, leave entitlements, start dates, and salary. You can also incorporate the employee’s line-manager, where they should work from (is this a remote role, in-office role, or a hybrid?), details on superannuation, and so on.
2. Duties and responsibilities of the employee.
This section can be quite long as it covers specific day-to-day duties, but may also include compliance with company policies, ongoing training expectations for hard and soft skills, how to care for business property, and more. Basically, anything the employee is expected to do will be covered here.
3. Restrictions and prohibitions applicable to the employee’s employment.
Here, you’ll cover any specific boundaries. For example, no drinking alcohol within business hours or driving the company car without written permission from a manager. Employee’s often include something about communicating with similar businesses here (e.g., never sharing private company information with a competitor).
4. Protection of the employers’ commercial interests.
Building on the last point, it’s important to include information relating to an employee’s obligation not to disclose business information during employment and after termination to other businesses. This encompasses information of your company’s structure, marketing strategies, intellectual property, confidential information and so on.
5. Arrangements on how to end the employment relationship.
If the employment doesn’t work out, this section is designed to protect the employer through terms and conditions regarding employee termination. This includes grounds for dismissal, notice of termination, and payment in lieu of notice.
6. Employee’s post-termination obligations.
Again, this may cover items such as not disclosing commercial information to a competitor or new employer after termination. However, you can’t restrain your former-employee from working for a competitor or starting their own business in the same marketplace.
Something to remember
Your employee agreement must abide by national workplace standards and legal minimum entitlements. These are set out in the 11 National Employment Standards (NES), awards, enterprise agreements or other registered agreements that may apply.
Some employers believe they’ve found a loophole in workplace fairness by not providing employee contracts, but this isn’t the case. In Australia, all employees are protected by the NES, regardless of whether they’ve signed a contract.
Do it right the first time
Making your employee’s pay, conditions, and role clear from the start can help protect your business in the long-term. If you’ve never created an employment contract before, the Government has a useful tool here. Even after you’ve created it, it’s strongly recommended you have it looked over by a professional who can advise you of any inconsistencies or legal downfalls. When you’re ready, we’re ready to support you.
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