The employment contract is an agreement between the employer and the employee and aims at ensuring that both parties agree on the terms and conditions of their relationship.
The employment contract should clearly stipulate the responsibilities of each party, including their rights and obligations.
If you’re a startup or small business, penning down the finer points of an employment contract can be difficult.
Often, smaller companies create employment documents either by taking some reference from the internet or by asking for recommendations from industry friends.
There is no standard employment contract. The terms and provisions vary widely based on the nature of the company’s business, the company’s internal policies, and the position offered.
However, despite their differences, some fundamental provisions typically appear in most employment contracts.
Here are a few of the most standard clauses you can expect to find in an employment contract:
Terms of employment
Employment contract terms should be in line with the terms of employment that you have discussed with your employees.
The first section which needs to be included in the place of work, followed by pay rate and date of employment.
The employee must also specify hours of work and any increments cycle that they may have agreed upon with you.
The next component to include in your employment contract is Job responsibility. It is the overview of what you are expected to do as an employee and how you will be evaluated for doing this work.
The job title should be written as a concise statement of the primary tasks associated with the position.
If there is more than one title, they should all be listed together in brackets after the primary title on page one of your contract (for example Billing Specialist II).
The nature of work section should explain what type of work is involved in each job title.
You may want to explain how much time each job takes up and if there are other factors involved such as travel or overtime hours required by that position (e.g., “This position requires up to 40 hours per week”).
Probation & Termination Clause
You must outline the probation period, which is the time you want to give new employees to prove themselves.
You can also include specific performance expectations or metrics that will be used to evaluate whether your employee meets those requirements.
It’s important that you clearly state how long this probation period will last as well as any other terms related to it (e.g., what happens if they don’t meet expectations).
If you want them to stay on after their probation is over, make sure that’s clear too!
A termination clause must be mentioned in the Employment contract for both voluntary and non-voluntary termination.
For voluntary termination notice period clause should be mentioned and in case the process is not followed what complications employees will face?
You should also mention in which all cases employer can terminate the employment of an employee without giving any notice period.
The non-compete clause is a clause that restricts the employee from engaging in any business activity outside their former employer’s field of work for a specified period of time.
The duration of non-compete clauses can vary, but they are typically no longer than one year.
A non-disclosure agreement (NDA) is a contract that prevents employees from revealing confidential information.
The information covered by the agreement is usually related to company secrets, trade secrets and other proprietary business processes of the employer.
NDAs can also include compensation details as part of the confidentiality portion of such agreements as well as other details that may be considered “confidential” or “trade secret” under applicable state law.
You may be asked to present at external conferences, offer advice to other companies or provide expert input on business issues. This is considered external engagement.
You must seek permission from your employer before engaging in external engagement.
Without written permission, they cannot engage themselves in any external work if they are working full-time with some organization and also if they are found to be doing so that may lead to the termination of their employment with the employer.
Transfer & Promotion process
The promotion policy should be made clear to the employee. It is important that the policy clearly defines all aspects of promotion, such as:
- Who will be eligible for promotion?
- How often can employees be promoted?
Other factors that must be included in the transfer & promotion process are:
- The procedure for transferring employees or staff members; in which all cases employer reserves the right to transfer the work location of the employee.
Leave policies are an important part of any contract. Leave policies to define the amount and type of time off employees have available to them, as well as how much it will cost them to take this time off.
The first thing to include in leave policies is a statement that indicates whether the company offers paid or unpaid vacation, sick days, and holidays.
If you offer paid vacation and sick days, then you should state what the employee must do if they want their paychecks while on vacation or sick leave.
You should also describe how many hours per week an employee must work before they can request a vacation day with pay.
It is essential that you, as an employer, draft a well-written and legally enforceable employment contract to protect your business interests.
If you do not have an employment contract in place, the employee has the right to simply quit the job at any time without notice or cause.
In this scenario, the only thing protecting your company is whatever verbal agreements were made between you and them during their interview process or on their first day of work.
At the end of it all, it is important to remember that not every employee will work out for your business.
But with a legally enforceable employment contract in place, you can make sure that your business interests are protected.
This will make sure that when an employee leaves your company without following proper procedures or fails to adhere to the terms and conditions of their employment contract, they do not take away anything other than their salary from you.
Many Startups do not realise the importance of building strong employment contact and most time it is taken from the internet and which does not protect the interests of the business.
If you really want to build a long-term business you should take professional help to build all your employment-related contracts to ensure your long-term business interest is protected.