As an employer, you know the importance of setting proper expectations before the start of any endeavor. This also applies to the hiring of new employees.
An employee contract provides mutual understanding and protection to both the employer and the employee. And while every business is different, some items should be included in every contract with a new employee.
Why you need an employment contract
There are several reasons why employment contracts are crucial, such as:
- They define the terms of employment, including job responsibilities, salary, benefits and working hours.
- They can protect the company’s interests through confidentiality agreements or intellectual property rights.
- An employment contract can serve as a reference point in the event there are disagreements between the employer and employee.
- It provides job security to the employee, thus decreasing turnover.
In order to be mutually beneficial to the employee and employer, a comprehensive contract should include the following:
- Job description and responsibilities
- Employment start date
- Compensation, including salary, payment frequency and bonuses, if applicable
- Probation period
- Work hours, overtime, flex time and remote work
- Benefits such as health insurance, retirement plans, paid time off, sick leave and other benefits the company offers
- A confidentiality clause to protect company information, including trade secrets
- Termination terms such as how much notice must be given and reasons for termination.
- Grievance procedures and dispute resolution
- Who retains ownership of any work created during employment
For an employment contract to be legally binding, it must align with state and federal laws. Failure to do so means running the risk that the agreement could be declared null and void in court.