How to Create Good Employment Contracts for Small Businesses
Australia does not mandate that employment contracts to be in writing. Some Modern Awards or Enterprise Agreements do require employees and their employees to agree to certain things in writing, such as minimum part time hours of work, days and times when work will occur and flexible work arrangements. However, in general there is no overarching statutory obligation for working arrangements to be recorded in writing.
Importantly, it does not mean that a contract of employment is not required. It simply means that the contract of employment does not need to be recorded in writing.
An official employment contract serves to safeguard both the employer and the employee. Conflicts about the terms and conditions of work are likely to occur in the absence of a documented employment contract. When there are no employment contracts in place to govern the job relationship, employers frequently struggle to deal with their employees.
A ‘contract’ is simply any promise, or binding agreement between two parties that has the four essential elements of a contract. Those key elements are:
- There is an offer;
- There is acceptance;
- There is an intention to create a binding legal relationship; and
- There is consideration (in other words, the contract involves an exchange. In the case of employment, the exchange that occurs is labour in exchange for a wage).
- The essential elements of a contract can be achieved through either a verbal or written agreement.
There are three crucial questions you should ask when creating a contract,
- Is the position covered by a contract or award?
- Is the position full-time, part-time, or casual?
- Is the position for a set period of time or a specific project?
Is it alright to NOT have a contract?
While this is not unlawful (unless there are specified things that must be agreed to in writing by an Award or Enterprise Agreement), it poses a serious danger to any employer, especially if a disagreement were to develop later on in the employment relationship. In this sense, a written contract of employment should be seen as a crucial source document that can explicitly state what was agreed to in the beginning.
Employment contracts can include a range of terms, provided what is being agreed to is not inconsistent with the law, or a minimum term of an Award or Enterprise Agreement.
What should I include in my contracts?
At their most basic level, employment contracts should contain the following:
1. The parties:
Who is a party to the contract.
2. The position:
What position has the person been employed in?
3. Payment terms:
Of course, payment conditions are essential to creating an employment contract. These conditions should outline the agreed-upon sum, the frequency of payments, and the conditions under which the sum may grow. The agreement should clearly state what is included in the payment if it includes other sums (such as a set rate or salary).
4. General Terms relating to the National Employment Standards:
It is crucial to record the general terms of the engagement even though many of these may already be covered by the law. This should include information such as the employee’s regular working hours, applicable leave benefits, and the amount of notice needed to end the employment contract by either side.
Employers may also choose to add additional terms that are pertinent to their business or sector in addition to the ones listed above. These could include non-disclosure agreements or stipulations restricting trade or employment activities post-employment. These need to be carefully drafted, but they are frequently crucial to safeguarding the company both during and after the employment period.
Important to Remember:
- An employment contract is likely to exist whether its written down or not.
- The interests of both parties are best met by having a written contract of employment.
- Contracts should include some key terms, but should also reflect the specific interests of the business.
If you require further assistance in drafting employment contracts for your business, contact Clyde Industrial today on 1800 954 696.
Do you need further assistance in drafting employment contracts?
We’re ready to help you.
info@clydeindustrial.com.au
1800 954 696