Seven Crucial Terms for an Employment Contract
An employment contract is a written contract between a company and an employee, legally binding them together.
Why Is an Employment Contract Essential?
An employment contract is equally beneficial to both parties involved for several reasons, including:
- It ensures that both parties respect their specific obligations and restrictions.
- It lets the employee know what they should expect once they join the company.
- It protects the job security of the employee and ensures the protection of their rights as an employee.
- It protects the employer from the release of crucial information even after an employee leaves them.
- It gives an employer enough time to find a replacement for an employee who's intending to resign.
Types of Employment Contracts
There are different employment agreements, and it's essential to fully understand them to choose the best one for your needs.
Permanent Employment Contract
This contract ends for both part-time and full-time employees only when either the employer or employee chooses to end it. Permanent employees put in regular working hours and receive payment in a fixed cycle.
Fixed-Term Contract
A fixed-term contract ends on an agreed-upon date, which can be weeks, months, or years from when the contract is signed. Either of the parties can terminate the agreement on specific grounds before the termination date. Fixed-term employees can also extend their contracts and become permanent employees.
Casual Employment Contract
Companies consider a casual employment contract when they offer work to an employee on a one-need basis. The casual employee contract can either guarantee a minimum quota of work hours or a zero-hour contract. The contract period is either fixed or continuous.
A Contract Must Include the Following:
Titles and Duties of the Position
Titles help distinguish employees based on their skills and experience. Allotted duties are critical information in an employment contract. Employers should be specific regarding their expectations and include their plans for performance evaluation.
Remuneration
Remuneration is the amount of compensation an employee receives for services or employment. It includes salary, bonuses, and any employee incentives throughout their service period. The contract must specify the criteria for rewards and incentives and information about any tax or insurance deductions. It should also explain any added benefits like accommodations, transportation, or medical benefits. Both parties should mutually agree on the remuneration payment strategy and due date mentioned in the contract.
Commencement and End Date
It's necessary to mention the commencement date in a contract. The worker must begin their work from the given date. Failure to commence work on the agreed date while not notifying the employer might cancel the contract. In the U.S., termination of employment contracts is by default at the will of either the employer or employee. It's essential to include the employment contract's termination date in the case of a fixed agreement.
Termination of Employment
Termination is the ending of an employment contract, which can happen voluntarily or involuntarily. Failure to meet specific standards expected of the employee can result in termination by the employer. Incompetence at work, lack of productivity, or disciplinary issues like theft, harassment, and aggression, are the most common reasons for termination.
The employee can also initiate the contract termination, but it's critical to associate the action with a reason specified in the contract for either party to terminate. This section should include the duration of the notice period required to complete the termination and other employee restrictions even after termination.
Data Confidentiality
Most employment contracts contain a confidentiality agreement whereby the worker guarantees not to disclose any inside information regarding the company. It helps protect confidential information like client data, trade secrets, and the organization's business strategies. The unauthorized sharing of sensitive company information is a bailable offense and could incur hefty compensation. The confidentiality agreement helps an organization protect its business and clients.
Hours of Work
The minimum weekly or daily working hours expected of the employee are included in the employment contract. Company policies on sick leave, family emergencies, and unpaid leave should also be detailed in the employment contract.
Applicable Law
Your specific state's laws govern legal disputes between the employer and employee. Some state laws favor the employee more than the employer, while some are more beneficial to the employer. Since a contract can be connected to several places, a governing law clause indicates the parties involved in the contract's choice of law.
The resolution of a dispute on employment contracts is made either by arbitration or by the judiciary. It's also common for the contract to include a mutually decided choice from these two dispute resolution methods.
Creating An Employment Contract Online
An employment contract ensures that the employer and employee are equally responsible for actions following the establishment of an employment contract. The basic information given above is an excellent starting point to set up your employment contract.
A digital template provider like 360 Legal Forms will guide you and simplify the preparation of the contract. With our simple creation and paperless signing process, you can set up and validate the agreement in no time. You can also receive free unlimited access to our extensive library of legal document templates using our 7-day free trial.