Employment contracts are an essential part of any business. They are documents that help to govern the relationship between an employer and employee and capture all the important agreements between them.
Drafting a good employment contract is therefore important to the smooth operation of a business and prevents any misunderstandings between parties. To avoid such misunderstandings that can lead to business operations suffering, below are 5 most important things to include in an employment contract.
1. Job title and responsibilities
The contract should clearly indicate the job title and the roles or duties the employee is expected to perform. This is important to ensure understands what the job entails and there are no misconceptions. This section of the contract will also ensure the employee is assigned tasks that were discussed during the interview.
In addition, the contract must clearly stipulate the procedure for reviewing performance and all appraisal details. It should also state how employees can benefit from these assessments and what can occur after such a procedure. For instance, it should be relayed that a positive appraisal could result in raises or promotions and a poor one could result in demotion or termination. This gives you as the employer the flexibility to act depending on the employee’s performance.
2. Job scope
Before an employee begins their position, scope and expectations of the role should be reviewed. A good employment contract should contain information on typical working hours and specify the number of hours the employee is expected to work.
It is equally important to specify the type of position being offered, such as part-time, full-time, or occasional employment. In doing so, you will guarantee that the employee is aware of what type of position it is and they can make a decision accordingly. This will prevent any confusion down the road and allow you to avoid filling the position again if the employee misunderstood the scope of the job and resigns as a result.
3. Salaries and other benefits
An employment contract should always include details of the pay and the benefits an employee is entitled to. It should include the salary figure and when pay days are. It is also important to include other important details like taxes the employee is required to pay and any other deductions such as for benefits or union dues.
The benefits an employee is entitled to should also be included in the employment contract. These can include medical, dental, retirement, and insurance benefits. It is essential to outline how the employees qualify for these benefits and which ones they are specifically going to receive as there could be an inclination for employees to assume that they will receive benefits but in reality may not. For instance, their position may be part-time or occasional and this could mean they do not qualify. You want to specify all details of benefits so the employee is aware of their entitlements.
4. Termination details
Another important thing to include in an employment contract is the details regarding termination. These details explain how and what can make the working relationship come to an end.
One clause that needs to be included in your employment contract is the ‘just cause’. This kind of termination occurs when the employer ends the employment because of the employee’s actions. This means that the employee has failed to deliver as expected or because they have breached some terms of the contract. Another part that you should consider adding is a ‘without cause’ piece. This is where employment ends but not necessarily because of the actions of the employee. This may occur because of downsizing or because of bad relations.
The final way a contract may be terminated is through resignation. This is where the contract ends because an employee has decided to leave the organization. The contract should outline what is expected of the employee before and after resigning. To ensure your employment contract is drafted properly, consider communicating with an employment lawyer during this process.
5. Compensation
This part tries to explain what an employee is entitled to when the working relationship comes to an end. When the contract is terminated for ‘just cause’, the employer will not be liable to pay the employee a severance package because the employment terminated due to the actions of the employee.
When the contract ends ‘without cause’, the employee is entitled to compensation. It is important to specify basic conditions of compensation in the employment contract you provide employees and you may want to try and get them to agree to these conditions and no additional ones. This will save your company money and resources.
If the employee decides to resign, all rights to severance pay are forfeited because he/she is the one ending the contract. In your employment contract you should also include the stipulation that ample notice needs to be given to allow you the ability to find a replacement. A vacant position may cause your company losses and operation disruptions so obviously you want to try and avoid this.
