What’s included in an employment contract?
An employment contract is an agreement between an employer and an employee. It might sound strange, but according to the Fair Work Act, there is actually no obligation to have written employment contracts in place. So, you may be thinking, why have one in the first place?
Without something on record, disputes or misunderstandings may arise. A written contract helps protect your rights as the employer. Having something documented helps to guide the relationship and set the expectations from the start. In this blog, we identify what you should include in the employment contract, including recommended clauses.
National employee standards
The National Employment Standards (NES) provides the ten minimum employment entitlements.
All employees are covered by the NES, which means that an employment contract, award, enterprise agreement or other registered agreement cannot make the employee worse off than the NES.
Key clauses to include
There are a few clauses we strongly recommend employers include in the employment contract, we discuss these below.
The probation period determines your suitability for the job and business. There is no legal obligation to have a probationary period. What the Fair Work Act does specify is the minimum period of employment in Australia. This determines when an employee can access unfair dismissal laws and provisions.
The minimum period of employment for small businesses is 12 months. A small business is one with fewer than 15 employees. For those in a larger firm, the minimum period is six months.
If for whatever reason, the probation doesn't work out, the employee is entitled to receive notice to terminate and have any unused accumulated annual leave hours paid out.
We strongly recommend seeking professional advice from one of our HR Consultants before terminating employment during the probation period.
Restraint of trade
The clause applies after the employee has left the business. It's used to protect your business by explicitly stating the former employee cannot:
- use your confidential information or intellectual property.
- work for your competitor for a specific period of time after they've left the business
- approach your employees, suppliers and customers
Employees have a common law obligation to maintain confidentiality, even if this clause is not included in the contract. Despite this, it's still a good idea to include because your business holds a lot of confidential information such as business plans, strategy, client lists and trade secrets. Having this clause sets clear expectations to maintain confidentiality in the workplace.
Depending on your industry, there may be specific requirements around the confidentiality of client information and privacy laws.
Termination of employment
When drafting the termination clause, you must follow the notice requirements under the Fair Work Act. Employers must provide notice or payment in lieu of notice when an employee is terminated.
The minimum notice periods are set out in the notice and final pay section of the NES. An extra week of pay is provided if an employee is over 45 and has worked with you for at least two years. If the employee will be on an award or enterprise agreement, there may be a longer notice period, so double-check this.
The only time notice is not required is if an employee has been terminated due to serious and wilful misconduct (such as theft, fraud, etc).
Need an employment contract?
A properly drafted contract is critical to help you manage risk in your business. Positive HR has a range of legally-compliant employment contracts you can download straight away. These include:
We can also assist you in creating bespoke employment contracts tailored to suit your business needs.
If you have any questions about employment contracts and workplace obligations specific to your industry, please get in touch.