Employers and employees should have a clear understanding of each party’s rights and responsibilities before entering into an Employment Contract.
Without a written agreement, employers may be at risk of certain liabilities and employees may not feel secure in their role. In fact, employment laws often require workplaces to create Employment Contracts for certain job positions. So it’s important to understand how job agreements work before you sign a legally binding document.
Learn about the main terms and conditions found in an Employment Contract, including job title and duties, compensation, and restrictive covenants.
Reviewing the job title and duties in an Employment Contract
The job title and duties in an Employment Contract should match the description in the original job posting. If a candidate applies and interviews for a certain position, they’ll be surprised to see something different in their employee agreement.
If there are discrepancies, prospective employees should discuss them with the hiring supervisor or human resources manager before signing. It’s possible that there was just a clerical error. But if you suspect your employer has different expectations of you, voice your concerns or leave before you’re bound to a written contract.
For instance, an employee might interview for a manager position but find their job title changed to a supervisor or lead position when signing their contract. While a small change in wording like this doesn’t seem like much, it can affect things like wages, benefits, and responsibilities.
Read more: 15 Questions You Can’t Ask Employees
Discussing salary in an Employment Offer Letter
Many employers send an Employment Offer Letter to summarize the key terms and conditions of employment, such as salary and start date. An offer letter helps automate the hiring process and outline any preconditions for employees.
A prospective employee should review this letter and discuss any concerns with their employer before signing a formal Employment Contract. It’s crucial to understand workers’ compensation and how performance-based incentives affect salary or an hourly wage. An offer letter and job agreement should outline these key details.
Candidates often agree to the main terms, but they may wish to negotiate their starting wage. The offered salary may differ from a candidate’s initial expectations. For instance, the employer may divide part of the salary into commission, bonuses, or other benefits.
If you’re applying for a job, research the average salary of a job role to determine the wage you want and the wage you’ll settle for. Then, practice explaining your value to a potential employer.
Employers may discuss compensation in the interview process, or they may bring up a number in an offer letter or employee contract. In either case, candidates should prepare to talk about the value they can bring to a company. Effective negotiation takes practice but can help employees secure the compensation they deserve.
Outlining work hours in an Employment Contract
Employment Contracts typically outline an employee’s type of hours and vacation.
For instance, the document should specify if the work is permanent, temporary, full-time, or part-time. It might also specify the hours an employee must be at work, such as from 9:00 a.m. to 5:00 p.m.
While many employers offer at least two weeks of vacation per year, some require employees to accrue vacation and sick time as they work. Others require new employees to complete a probation period (usually three to six months) before using any time off benefits.
Compensation for overtime often varies by company and industry. If you’re an employer using LawDepot’s Employment Contract template to customize an agreement, consider adding a clause to address overtime.
Some employers pay their staff overtime at time-and-a-half for each extra hour worked. Others will bank overtime for time off in lieu. In either case, it’s important to agree in writing how overtime works.
When looking into overtime, you should consider:
- When overtime kicks in: Does it kick in after working more than 8 hours in a day? Does it only take effect if after working more than 40 hours per week?
- How much the wage increases without banked time: Does it increase at time-and-a-half, double-time, or in increments as overtime hours increase?
- How to use banked time: Does the employee get time off? Can they exchange banked time for their hourly or overtime wage? Can you do a mix of both time off and payout?
Be sure to look at your local or state employment laws as well, as there may be regulations for overtime.
Adding restrictive clauses in an Employment Contract
A restrictive clause, also called a restrictive covenant, prohibits an employee from taking an action that could potentially cause harm to the employer. For example, an employer may add any of the following clauses to a contract:
- Non-compete: A non-compete clause prevents the employee from unfairly competing against the employer during employment and after it ends. For example, an employee cannot open a competing business while employed with their current company.
- Non-solicitation: A non-solicitation clause prevents an employee from recruiting any of the company’s employees or contractors after said employee has left the company. Although poaching is popular in many industries, a former employee who is bound by a non-solicitation clause cannot participate in this practice without the risk of getting sued.
- Confidentiality: A confidentiality clause keeps employees from divulging the company’s confidential information to unauthorized third-parties. For instance, a breach of confidentiality may occur if an employee leaves one company for a competitor and passes on proprietary information.
Employees should read through these restrictive clauses carefully and abide by the rules when changing employers. Adhering to these promises will likely prevent a lawsuit.
However, employers should keep in mind that restrictive clauses must be reasonable. If the restrictions are too broad or last too long, a judge may remove the clause from the contract.
Signing an Employment Contract with confidence
Whether you’re an employer drafting an Employment Contract or an employee signing one, filling a job position presents new opportunities. Take the time to review the agreement carefully so that it accurately reflects the rights and responsibilities of all the parties involved. After all, a written contract protects both employers and employees.
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