Drafting an Employment Contract

A well drafted employment contract is vital for any company. This kind of contract should be prepared and reviewed thoroughly to avoid misunderstanding and possible legal issues and to protect both the employer and employee.

A contract of employment contract should not be confused with a letter of employment. They are not the same. The former should definitely be more detailed document than the latter. In fact, most experts would advise that you keep the letter of employment and the offer letter to the bare minimum. Leave the details and, of course, the carefully worded and specific terms to the contract of employment.


This kind of contract should state the salary in terms of increments in payroll. Don’t put the compensation in terms of yearly salary because this could be misconstrued and lead to possible legal issues down the road. There should be no promise, explicit or implicit, of the employment to reach a full year if that is really not the case.

This brings us to stating the conditions of the employment – which include the continuation, evaluation and the probationary period, if any. The employment contract should also indicate that continuation of employment also depends on compliance with the policies and procedures of the company and on job performance.

Take note that there is no specific legal requirement on which details of the contract should be put in writing. But these details would be helpful: the employment status; official title; probationary period, if any, as well as the period covered by this probationary period; and rate of pay or salary; pay frequency; the name or names of immediate supervisor/s; and the hours or the time and days that the new employee will report for work. These details don’t have to all be in the contract. Remove or add information depending on what is more appropriate for your company and for the particular employee.

Preparing the contract of employment is the time to be concise and clear. Avoid ambiguous words and incomplete statements or terms that can lead to misunderstandings, differing expectations and legal disputes. Do not leave room for the other party to make assumptions; state the key details of the contract in the clearest terms possible.

Most organizations hand out the employee handbook or the copy of the company’s policies and guidelines along with the contract of employment. There is also typically a discussion of the policies conducted by an HR specialist of a member of the company’s HR department. The handbook of company policies should have the details, again in clear and concise terms, of what the employer expects from the workforce regarding procedures, conduct and even job performance. Stating the details of the standards and policies is a way to manage risks and protect both the employer and employee. The policies should also address and protect the company from suits on sex discrimination, adverse action, illegal dismissal and the like.

When drafting the employment contract, make sure you are compliant with the current legal requirements. Be careful so that none of the provisions of the contract would turn out to be inconsistent or contradictory to current federal and state laws. The best way to accomplish this is to have an employment law expert guide you as you draft the contract.

Resource:
Kylie Milan is a HR specialist, who provides legal advice in managing an employment contract in Australia. We provide guidance and representation with regards to employee relations, workplace law and staff administration.