What Is a Written Employment Contract?
An employment contract, or an employment agreement, is a legal document used to set standards for employees while working at a company and reduce employers’ employment liability risks. It is signed by both the employee and the employer and outlines the rights, responsibilities and obligations of both parties during the term of employment.
Employment contracts can be implied, oral, or written, involving a lengthy physical contract that the employee signs. The contract reflects the agreed upon terms when the employee decided that they would take a position.
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How To Write an Employment Contract – Step by Step
There are a few elements common to an employment contract. These are the steps you should take to write your own employment contract:
- Add employment title : Provide a title to your employment contract. This could be something like “employment agreement” or “[company name] employment contract”.
- Party identification : Identify the parties involved in the employment contract. This should also be followed by providing basic information about both parties and the name of the business where the employment will be taking place.
- Add terms and conditions : You should list the minimum terms and conditions required by the position, often laid out by federal, state and local government. This would involve things like vacation pay, severance pay and work hours. Beyond this you should also mention company policy regarding vacation days, sick days, benefits, dress code, etc.
- Describe job responsibilities : To prevent any surprises on either part, your employment contract should clearly lay out duties and responsibilities associated with the job. For instance, if you’re hiring for a barista position, you could include that the job would require client-interaction, customer service, coffee-making, cleaning coffee stations, managing online orders, etc.
- Provide compensation details : You should state the compensation provided for the job in your contract in a clear and direct manner. You should include details regarding the way in which the employee will be compensation–hourly/weekly/salary or commission. You should also explain how overtime will be calculated based on the employee’s status as exempt or non-exempt. Other details would include information about holiday pay, paid time off, method of payment, bonuses, etc.
- Outline contract terms : Consider adding other terms of the agreement to your contract. Some common clauses used in employment contracts are non-solicitation , privacy, probationary, failsafe and non-compete . Non-solicitation clause bans the employee from soliciting customers and from leaving the company. Privacy clause lays down privacy-expectations regarding employer-issued electronics and email. Probationary clause gives the employer the right to terminate an employee within a specific period of time without notice. Failsafe clause confirms that the employer will not provide anything less than employment standards. The non-compete clause prohibits employees from competing with their employers for a specific period of time.
- Consult a lawyer : Before you send out your employment contract, it is advisable to consult an employment lawyer who is an expert in the local, state and national employment laws, rights and standards to ensure your contract meets set standards.
- Provide the contract to your employee : You should send your employment contract to your employee. The employee will then read and negotiate or sign on to the agreement, making it effective.
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What Should Be Included in an Employment Contract?
An employment contract generally includes the following sections:
- Duration of employment: Your employment contract should contain details about the duration of employment, if it is an independent contract or a salaried position. If the employment is a salaried full-time position with minimum commitment requirements, you should also mention that.
- Salary or wages: Mention the exact compensation provided for the job.
- General job responsibilities : Lay out general job opportunities
- Work schedule : You should mention the work-schedule the employee is expected to work.
- Benefits : Mention benefits provided by the company.
- Confidentiality : Adding a confidentiality clause ensures that the employee doesn’t disclose confidential information used by the business.
- Severance pay : You should mention the severance pay offered by the company.
- Termination details : The contract should include termination details such as notice period and circumstances that allow instant termination.
- Effective date : You should include the exact date when the agreement begins.
- Notice : Your contract should include the time period taken by the company to process any legal action by mail or email whenever any notice is received.
- Dispute process : Mention that the dispute process such as mandatory arbitration or discrepancy will be handled in a court of law.
- Applicable law : Mention the country, state and local laws that would apply to the interpretation of the employment contract through a governing law clause .
- Signatures : Your contract should be signed by all parties to be effective.
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Common Types of Employment Contracts
There are multiple types of employment contracts depending on the type of employee being hired. Here are some of the common employment contracts used by employees:
- Permanent Employment Contract: A permanent employment contract is used for employees who are paid a salary or hourly rate and work regular hours. This type of contract may apply to full-time or part-time work and is ongoing until it is terminated by either party.
- Fixed-term Employment Contract: A fixed-term employment contract has a set end date. Employees with a fixed-term contract have the same rights as permanent employees.
- Casual Employment Contract: A casual employment contract is used when employers cannot guarantee a regular working pattern. The contract would generally detail the minimum number of hours that employees are expected to work each week and the type of pay.
Learn more about independent contractor agreements .
Who Writes Standard Employment Contracts?
Employment contracts are generally drawn up by the company through their legal counsel. However, in many cases individuals who are hiring the employee can also choose to write their own contracts. In some cases, independent contractors or freelancers can provide their own contracts and terms of employment. In all scenarios both parties would need to agree and sign the contract for it to be effective. It is advisable to contact an employment lawyer or a contracts lawyer to write an employment contract.
There are certain benefits of writing an employment contract:
- Employment contracts are legally binding documents that both employers and employees agree to abide by. This reduces the chances that one party will take legal action later on or that there will be disputes about job expectations and responsibilities.
- An employment contract sets clear expectations for the employees and outlines actions that might be taken if they don’t comply.
- The employment contract generally discusses paid time off (PTO) which helps limit the employees’ overtime pay and holiday pay. This can help the employer or business save time and money.
- An employment contract also ensures confidentiality through the confidentiality clause. This prohibits your employees from disclosing sensitive information.
- Terms and conditions along with clauses protect the employer as well as the employee making disputes less likely. Even if there is a dispute, the contract insures that both parties are held liable based on duties and responsibilities they signed on to in the contract.
Get Help with an Employment Contract
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