One of the most important documents for small businesses is the written employment contract. Even without a written employment agreement, a contract for employment is still formed and legally enforced. That is why it is important to have a well-written contract between the employer and the employee because it ensures that both the employer and the employee are aware of and understand the terms and conditions of employment.
You should have a written agreement for all your employees; full-time, part-time, fixed-term, hourly, or salary. The agreement should be signed before the employee starts work and updated as needed over time. If the agreement is not signed before the employee starts work, some additional benefit (consideration) must be given, such as a signing bonus, promotion, or salary increase to make the agreement legally valid.
Employment agreements set out the terms and conditions of employment and any obligations that continue after the employment relationship ends, such as confidentiality and non-solicitation. They can limit a business’s costs when terminating an employee. They also enhance the perceived value of the business to prospective buyers.
An employment agreement can be as simple or as complex as needed, depending on the type of employee. Hourly employees may only require a one-page letter detailing their wages, benefits, duties, at-will employment status, and termination provisions. Some items to consider including in the employment agreement are the type of employment (full-time, part-time, or fixed term), start date, duties of the employee, rate of pay, hours of work, vacation entitlement, overtime entitlement, termination, and resignation procedures, as well as post-employment obligations.
Salaried, commissioned, or professional employees will require a more detailed agreement. In addition to the basic information included in the hourly employee’s agreement, agreements with these employees may include the term of the agreement, if for a defined amount of time; a dispute provision; termination resolution provision; attorney’s fees provision; an applicable law section; and provisions governing confidentiality, non-compete, and non-solicitation. Additional sections may be needed depending on the specific job requirements. These more detailed agreements are best drafted by an attorney.
After signing the agreement, the employee should receive a copy of the agreement and a copy should be placed in their personnel file.