An employment contract is a formal agreement between an employer and employee, detailing the rules and expectations for the job. While it can be verbal, having it in writing is better for clarity. The contract must at least meet the same basic conditions and pay as set out in the National Employment Standards (NES) or relevant industry agreements. Any changes to the contract must be agreed upon by both the employer and employee, ensuring both sides are on the same page with the terms of employment.
What to Include in An Employment Contract
When creating an employment contract, it's important to clearly define the key aspects of the job. This includes specifying the employment status (like full-time, part-time, or casual), detailing the salary or wage, and outlining the employee's duties and obligations. Having these terms in writing helps prevent misunderstandings or confusion later on.
If you're drafting a job offer letter along with an employment contract, it's wise to get them professionally reviewed. This ensures the terms are clear and avoids any illegal or unclear conditions. A well-drafted contract not only provides clarity for both parties but also safeguards against potential legal issues.
When drafting an employment contract, it's important to include specific terms and conditions that clarify the relationship between the employer and employee, regardless of the company's size or industry. These elements should cover:
- Names and Details: Both the employer's and employee's names and personal details.
- Commencement and Probation: The start date of employment and any probation period, if applicable.
- Policies and Procedures: Reference to the employer's policies and procedures.
- Role Requirements: Essential job requirements like licenses, clearances, and registrations.
- Employment Type: Specify whether the role is full-time, part-time, or casual.
- Work Location and Hours: The place of work and business operation hours.
- Remuneration: Details on how payment is made (salary, wage, or piece-rate) and what is included or paid separately like superannuation and bonuses.
- Leave Entitlements: Outline leave entitlements as per the NES, including annual, personal, and long service leave.
- Employer Property and Information: Conditions for using company property and protecting intellectual property.
- Confidentiality: An agreement detailing what information must remain confidential.
- Non-disparagement: A clause preventing negative actions or comments about the company.
- Notice Periods: The required amount of notice for both parties to end the employment relationship, adhering to minimum periods under the Fair Work Act.
- Termination and Redundancy: Conditions around ending employment, including redundancy terms.
- Legal Clauses: Clauses regarding assignment, jurisdiction, severability, and variation of terms.
When drafting an employment contract, it's also important to consider provisions for potential changes in the employee's role or duties. This includes scenarios where the employee might need to change locations, roles, or specific job responsibilities. It's important to clarify whether the original contract will still apply in these situations or if amendments will be needed.
Additionally, for certain positions, it may be appropriate to include non-compete clauses. These clauses can restrict the employee from setting up a similar business in close proximity to their former employer or soliciting their clients for a specified period after leaving the company. However, it's important to note that such clauses can be challenging to enforce and must be reasonable in terms of scope, duration, and geographic area to be considered legally valid.
Types of Employment Contracts
When engaging workers, the type of employment contract you choose should align with your business needs and the industry standards of each role. Here's an overview of the most common types of employment contracts:
Full-Time Employment Contracts
Full-time employees work, on average, 38 hours per week with ongoing employment. They are entitled to paid leave and require notice for termination. The specifics may vary based on industrial instruments covering the employee.
Part-Time Employment Contracts
Part-time employees also have ongoing employment but work less than 38 hours per week. Their work hours are usually regular each week, and they receive the same minimum entitlements as full-time staff, calculated on a ‘pro rata’ basis.
Casual Employment Contracts
Casual employees work on an as-needed basis with no guarantee of ongoing employment. They are paid only for the hours worked and can typically refuse shifts. They don't receive paid sick or annual leave and can usually be terminated without notice. They receive an hourly loading to compensate for the lack of benefits.
Fixed-Term Employment Contracts
This contract is for employment over a specific period or for a specific project. The contract concludes either at the end of the period or the project. Fixed-term employees have similar entitlements to permanent employees, though no notice is required if employment ends as per the contract's term.
Independent Contractor
Independent contractors are self-employed and provide services to various companies. They negotiate their fees and work arrangements and can work with multiple employers. It's crucial to distinguish between an independent contractor and a permanent employee to avoid potential business risks.
Each contract type comes with its own set of benefits and implications, and it's important to choose the one that best fits your business operations and financial considerations.
Termination of an Employment Contract
The termination of an employment contract can be initiated by either the employee, typically through resignation, or by the employer. It's crucial that the correct procedures are followed during termination to ensure fairness and compliance with workplace policies.
Regardless of who initiates the termination, certain entitlements may apply. For instance, depending on the circumstances, a dismissed or resigning employee might be entitled to notice pay. Additionally, they must receive their final payment, which includes any accrued entitlements, such as unused annual leave.
To avoid misunderstandings and ensure legal compliance, the terms related to ending employment should be clearly outlined in both the employment contract and the employee handbook. This provides a clear reference for both employees and employers on the process and entitlements associated with termination.
For further information and guidance on Employment Contracts, it's advisable to seek professional advice. You can reach out to Employment Compass at 1300 144 002 for initial guidance and support.
Frequently Asked Questions
What Is A Standard Employment Contract?
A standard employment contract is an agreement setting out the role, expectations, and minimum terms and conditions of employment, including job duties, work hours, remuneration, and leave entitlements.
What Should Be Included In A New Employee Contract Template?
It should contain details like the employer and employee's names, job start date, job description, type of employment, work location, work hours, salary, leave entitlements, intellectual property protection, confidentiality clauses, and terms of notice and termination.
Can I Write My Own Employment Contract?
Yes, but due to its legal importance, it's recommended to get expert advice to ensure all necessary terms are correctly included and legally compliant.
How Long Does An Employer Have To Issue A Contract?
It's best to provide a contract when offering employment, so the candidate can review it before accepting the job.
Can I Change The Terms Of An Employment Contract At Any Time?
No, changes to the contract require agreement from both parties.
Can Employees Be Dismissed For Refusing To Accept New Terms And Conditions Of Employment?
Dismissing an employee for not accepting contract changes can lead to unfair dismissal claims.
Do All Employees Need A Contract?
While not legally required, a written contract is best practice to clearly define employment terms and protect the employer in disputes.
Do I Need A Contract For A Casual Employee?
While not mandatory, it's advisable to have a contract with casual employees to clarify their specific employment terms, such as casual loading and shift refusal rights.
What Is The Difference Between Employment Contract And Employment Agreement?
These terms are often used interchangeably with no significant difference, typically referring to the same legal document outlining employment terms.