Employment contracts

As surprising as it sounds, in Australia there’s no obligation at law to have a written contract of employment. So why have one at all? Well, a written employment contract is designed to protect both the employer and the employee. Without a written employment contract, disputes over the terms and conditions of employment are likely to arise. Employers often have difficulties dealing with their employees when there are no employment contracts in place to guide the employment relationship.

Choosing the right type of employment contract is a tricky question. There is no magic ‘one size fits all’ solution. The employment contract needs to carefully reflect the agreement between you and your employee. Before you start drafting, you should ask yourself: is the role covered by an award or enterprise agreement? Is the role being offered on a full-time, part-time or casual basis? Is the role for a fixed term or a specified project?

Once you have chosen the type of employment contract, you’ll need to consider what clauses to include and what you should leave out. In this article, we’ll go over everything you need to know about employment contracts.

Do I need a written employment contract?

It’s quite common for many smaller businesses to employ workers on the basis of a “nod and a handshake”. This isn’t surprising. After all, it can be time-consuming to draft an employment contract and often too expensive to pay someone to do it for you. But what happens when there’s a disagreement between you and your employee? If you don’t have a written employment contract, how do you prove what the agreed terms and conditions of the employment are?

Contractual disputes frequently arise amidst terminations, resignations, and redundancies where the terms and conditions of employment contracts are often at the centre of disagreement. Employers have difficulties when dealing with their employees when there is no formal employment contract in place to define the working relationship.

How do I choose the right type of employment contract?

So, you’ve decided that you need a written employment contract. But how do you choose the right type? This is a difficult question. The contract needs to be tailored so that it carefully reflects the agreement between you and your employee. If you accidentally leave something out, then it will be difficult to prove this was part of the deal in the event of a dispute. On the other hand, if you try to include something that wasn’t part of the deal, your employee may refuse to sign the employment contract, or it may prove to be unenforceable down the line.

Although there is no standard employment contract, there are three key questions you should ask yourself:

1. Is the role covered by an award/enterprise agreement?

Whether or not the role is covered by an industrial instrument such as an award or an enterprise agreement will significantly affect various minimum conditions and entitlements including the employee’s agreed hours of work, breaks, minimum rate of pay as well as other benefits such as penalties, overtime and allowances.

2. Is the role full-time, part-time or casual?

There are important differences between permanent (i.e. ongoing full-time and part-time) employment and casual employment. As such, the type of employment will also have significant implications for the employment contract.

3. Is the role for a fixed-term or specific project?

Just as there are important differences between permanent and casual employment, whether the role is ongoing or for a fixed or maximum period of time will also have implications for the terms of your employment contract.

If the role is for a maximum term or linked to a specific project, you’ll need to consider whether to include an option that the parties may terminate the contract sooner upon notice. If you do include this clause, then the employee may resign before the work is complete. In the instance that you decide to not include this clause, then you may be required to pay out the balance of the contract if you ever want to terminate the employment before the agreed expiry date.

What should I include in my employment contract?

An employment contract should outline all the basic terms and conditions of employment, such as who the employer is, the commencement date, the agreed hours of work, where the work will be performed, who the employee reports to, the agreed remuneration and notice of termination. But there are a range of other things that you can also include which are primarily designed to benefit you, the employer.

There are also some important clauses that should usually be included, dealing with things like confidentiality, intellectual property rights and post-employment restraints.

What should I not include in my employment contract?

There are several terms that you should never include in an employment contract. In short, you should not include anything that is contrary to law or an applicable instrument, discriminatory, ambiguous, vague, contradictory, or confusing.

To ensure compliance with relevant legal frameworks, the employment contract cannot contain terms that are less than the minimum standards as set out in the National Employment Standards, an applicable industrial instrument, or other employment-related legislation. Attempting to exclude or avoid these minimum entitlements through an employment contract, even by mutual agreement with the employee, will have no effect.

Need help drafting an employment contract?

Evidently, there are a broad range of factors to consider when drafting your employment contracts, both from a compliance point of view, but also when considering how to best protect your commercial rights as an employer. As a Citation HR client, you’ll have access to a full suite of compliant template employment contracts via our Citation HR Software. Our well-versed team of experienced workplace relations consultants are also able to assist you in creating bespoke contracts that have been tailored to suit your commercial needs. If you need help drafting an employment contract, contact us for a free consultation.