An employment contract is a legal agreement between an employer and an employee. It sets out the terms and conditions of the employee’s employment. Although contracts can be verbal, they are best to be placed into writing as without a written or signed document, it can be difficult to resolve disputes or enforce against the employee.
Depending on the industry, role and the employment contract, an employment contract cannot provide less than the legal minimum found in either:
- the National Employment Standards or
- any award, registered agreement or enterprise agreement that may apply.
All employees are covered by the National Employment Standards (NES), which includes 10 minimum standards that employers must provide to their employees. For example, a couple of the NES standards include minimum working hours, work flexibility, annual leave and parental leave entitlements. The NES applies is regardless of whether an employee has a contract with you or not. As a rule of thumb, no contract can make employees worse off than their minimum entitlements under the NES.
Typical employment contracts cover off on topics such as:
- The Nature of the Employment, Probationary Period, Location of Employment, Salary/Wages, Superannuation, Employee and Employer Obligations, Employer’s Obligations, Public Holidays, annual, sick and long service leave, and
- Workplace Health and Safety, Termination of Employment, and Confidentiality.
While not necessary, it is suggested that the employment contract include a position description. This describes what the employee role is within the business and gives scope to what the employee can and cannot do. The contract should allow the employer to alter and change the duties of the employee from time-to-time. Small changes – such as a pay rise or change in hours – won’t require a full redraft of the contract. Such small changes should be accompanied by a letter informing the employee of the changes and noting the employment contract has not been changed.
Larger changes to an employee contract will usually require a redraft. Examples may include changing positions, significant pay increases, or moving from being employed on a casual basis to part-time.
An employer should always be aware of the difference between contractors and employees. Employees work in the business while contractors work for their own or a different business. You can read about the differences here: https://www.ato.gov.au/business/employee-or-contractor/difference-between-employees-and-contractors/. You should draft a separate contractor agreement to govern the relationship between your business and the contractors that you engage with to provide services.
A poorly drafted employment contract may mean it is unable to be enforced, or it could put the business at risk – particularly if you have failed to consider entitlements stipulated under an award. As a result, we highly recommended that you seek professional legal advice when drafting or entering into an employment contract with an employee. Read our article on protecting your business from contractors here.
Give us a call if before you sign an employment contract or if you are unsure of your responsibilities or obligations as an employer, it is recommended you seek legal advice.