How Do You Draft an Employment Contract?
An employment contract is a necessary agreement signed by employer and employee that outlines the period of employment, obligations of both parties, and various rights and responsibilities of the company and employee.
There are many benefits of employment contracts :
- They set expectations and standards
- They reduce liability risks
- They offer legal protection for both parties
You can learn how to write an employment contract in this post. You can also contact a lawyer for employment contract to help with an employment contract review to ensure your document includes all the most important details and legal language.
What is a Standard Employment Contract?
A standard employment contract is a legal document between an employer and employee that outlines the scope of their relationship. This includes the rights and responsibilities of both parties and any benefits the employee will receive in addition to their regular compensation.
The terms of employment in a standard employment contract establish performance expectations and standards for the employee.
The employment contract can also reduce liability risks for the employer by reserving the right to terminate employment at any time.
A standard employment contract in the United States is an at-will contract. This means the employee agrees to perform a job independently. The employer can terminate them for any reason except for discrimination.
All U.S. states except Montana use at-will contracts as their standard employment contract. In Montana, after a mandatory probation period or at least six months of employment, employers can only terminate an employee with just cause.
Here is an article where you can learn more about employment contracts and what they cover.
What Are the 4 Types of Employment Contracts?
The four most common types of employment contracts are:
1. Permanent Employment Contract
This contract establishes an indefinite period of employment between an employer and employee. Employees with permanent contracts can work full-time or part-time, and they are entitled to receive benefits such as:
- Health insurance
- Life insurance
- Retirement contributions
2. Fixed-term Employment Contract
A fixed term is a defined employment period with a specific start and end date. Employees with fixed-term employment may be hired seasonally or for a particular project.
They generally do not receive any benefits beyond financial compensation. Their contract ends as soon as the time period ends, or they achieve a set goal.
3. Casual Employment Contract
A casual employment contract is for employees whose hours are not set. They may work a certain number of hours, but their schedule could change depending on the business’s needs.
4. Zero-hour Employment Contract
A zero-hour employment contract is rare, but it omits any required number of hours for an employee to work. While this may seem odd, it is mainly done to reduce liability risks for the employer.
Under a zero-hour contract, they are not legally obligated to provide any work to the employee, meaning they do not also have to guarantee benefits or a fixed salary.
You may see a zero-hour employment contract when someone hires someone as-needed. However, these contracts are less likely to be used when the independent contractor and freelancer agreements are available.
Here is an article to learn more about types of employment contracts.
What Must a Job Contract Include?
There are several key elements you should always include when writing an employment contract.
- Wages/salary: Specify how much the employee is entitled to, per hour or annually. Outline pay periods and payment methods, such as a bank check or direct deposit. Include any bonuses the employee may receive as part of their compensation package.
- Benefits: Additional benefits, such as health insurance, must be included in the contract—terms for coverage and deductions. If the employee is eligible for bonuses, explain how they will be administered. If this is the case, set a quota for performance measurement.
- Schedule: The employment contract should include a work schedule for the employee, including the minimum and a maximum number of hours they can work. Events such as holidays, overtime, and paid time off should also be included.
- Length of employment: The work period is either fixed or indefinite, full-time or part-time. The contract should specify the time the employee agrees to perform their job for the company and the options for renewal at the end of their contract.
- Confidentiality: Some employers may have employees sign a nondisclosure agreement or confidentiality agreement. These can be included as an amendment to the employment contract. The contract itself should also include a statement of confidentiality requirements and any additional documents the employee will sign.
- Noncompete clause: The employment contract can prevent the employee from working with a business competitor for a set amount of time after their employment contract ends or termination. This can also prevent the employee from leaving their job before their contract and working for a competitor.
Here is an article to learn more about the terms of employment and details to include in your contract.
Which Employees Should Sign an Employment Contract?
All employees should sign an employment contract unless they are a 1099 independent contractor or freelancer. Having a freelancer sign an employment contract changes the obligations for the employer, including the requirement to offer additional benefits and a salary.
Signing an employment contract is important to establishing a healthy working relationship. However, even if the employee and employer know each other personally, their professional relationship should be treated independently.
Many employees work under an implied employment contract. Their general terms follow federal, state, and local employment laws.
Implied contracts can still carry legal ramifications, but they are harder to enforce than signed documents. Employers also have less protection themselves if they do not offer employee contracts.
Without an employee contract, the employer cannot enforce work hours, confidentiality or prevent employees from working with or for direct competitors.
Here is an article with examples of implied employment in the workplace.
How Much Does It Cost to Draft an Employment Contract?
If you are wondering, “ What does an employment contract cost ?” the answer varies by lawyer and detail of the contract. However, the average employment contract costs $465.57. The final cost will depend on the employer’s needs, the scope of the contract, and the terms and variables within the agreement.
You can contact a lawyer for employee contract drafting or review after you write one yourself.
Working with an employment lawyer can also help you draft a general template that you can use for all your hiring needs going forward.
Here is an article with an example of an employment contract template.
Do I Need a Lawyer to Draft an Employment Contract?
If you have never written a legal document before or are unsure if your employment contract template covers all the legal requirements, you may wish to consult with a lawyer.
Lawyers can review employment contracts after negotiation or before submission. They can also help employees protect themselves from exploitation if they are unsure about the contents of a contract.
Here is an article with more information on employment law and what it entails.
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