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5 things to know about employment contracts

On Behalf of | Dec 5, 2023 | Employment Law

You probably have employment contracts in place for many of your hires as an employer. These are meant to protect the company and its workers alike. Are your agreements up to snuff?

To outline an agreement clearly, you must ensure everything that can impact your liability down the road is included in the contract. There are several points to consider as you’re creating a new employment contract or reviewing your current approach to contract construction.

They must have a complete job description

One of the hallmarks of a solid employment contract is that it clearly outlines the job the person will do. This includes stating the job duties and responsibilities for which the person is being paid. You can include performance standards and hours as part of the employment contract. The duration of the contract, if there’s an end date, should also be stated.

They need to have feature a clear pay structure

The pay structure, including base pay, bonuses and anything else pay-related, must be detailed in the employment contract. It should state if the employee is paid hourly or salaried. Pay frequency and other critical pay-related terms should be relayed so both sides can refer to it if there are any questions.

They should include all benefits information

Any other benefits the employee is due, such as profit sharing, health care, life insurance, disability insurance, retirement plans, or fringe benefits, should be written out. It’s best to note whether the employee or employer is responsible for the cost. The cost may be shared in some cases, such as insurance, so the formula or method should be noted.

They can feature other terms

The employment contract may have other terms, such as a nondisclosure or noncompete agreement. Any employment terms unrelated to pay or benefits should be included.

They may or may not contain severance information

The employment contract should include severance information if a severance package may come into the picture later. It’s best to spell this out in the employment contract so both sides know what’s due if necessary.

Creating an employment contract requires a working knowledge of applicable laws. Having someone on your side who can assist you with crafting a base contract and ensuring the terms are appropriate for each contract is beneficial because it can help to protect your business in a myriad of ways.