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HR Advice Online: Employment Contracts and why you need them

At the core of every employment relationship is the employment contract. The employment contract is a binding agreement between two parties in which an individual agrees to perform work in return for payment.

As with any contract, the law requires certain conditions to be met before it will recognise an employment contract. Those conditions are:

• There must be an offer of employment which is accepted by the prospective employee;
• Each party must provide consideration in return for the obligations undertaken by the other party.
• The parties must have intended to enter into a legal relationship.

So, what is the best practice approach to developing employment contracts that will protect the needs of your business? Below we answer some of your questions:

Do employment contracts have to be in writing?

A contract can be in writing or verbal.

While it is strongly recommended that a written agreement always be put in place when engaging an employee, in the absence of such a document, an employment contract can develop based on the conduct of the parties (i.e. if someone is performing duties for your business, excluding genuine contractors, it is more than likely that an employment contract exists).

Regardless of either type of contract being in place, there are a number of a number of implied duties that exist for both parties to an employment relationship. These duties include:

• The requirement for an employee to follow lawful and reasonable directions;
• The duty of fidelity;
• The duty of an employer to provide a safe working environment.

Why have a written employment contract? 

For an employer of any size, it is essential that a well-drafted employment contract be in place for every employee.

A written employment contract ensures that the rights and obligations of each party are clearly understood. This significantly reduces the risk of any misinterpretations or misunderstandings which could potentially put the business at risk.

What should be included in a written employment contract?

Where an employee is covered under a Modern Award or Enterprise Agreement, that Award / Agreement will establish the minimum wages and working conditions of the employment. 

The Award/Agreement will operate in conjunction with the employment agreement, with the terms also subject to the National Employment Standards (NES).

While an Award/Agreement and the NES will set out details of the employee’s working conditions and entitlements, the employment agreement will set out the specific details relating to an employee’s engagement. Such details should include:

• Employment type (Fixed Term, Full Time, Part Time, Casual etc)
• Commencement date
• Period of employment if fixed-term contract
• Agreed hours of work, and when the work is to be performed
• Location of work
• Agreed remuneration
• Payroll Frequency
• Probationary Periods (where applicable)
• The requirement to hold any specific industry licenses or professional registrations which are required to perform the role
• Post Employment Restraints
• Confidentiality Provisions and Intellectual Property

Employment contracts should be written in plain language so it is clear and well understood. 

What should not be included in an employment contract?

The employment agreement should not contain any provisions which are ambiguous, contradictory, discriminatory or that are non-compliant to law or an applicable industrial instrument. Clauses that refer to pay secrecy are also prohibited.

As the Employer, can I change an employment agreement?

An employment agreement can only be varied by consent between the employer and an employee (i.e an employer cannot unilaterally change an employee’s employment agreement without the employee’s consent).

How do I prevent contractual issues arising?

Always ensure that your employment letters are compliant and meet all legislated requirements and do not include any elements that are legally prohibited.

HR Advice Online provides to our First National members employment contract templates and letters that businesses may require from time to time. If you are ever unsure about Employment Agreements you have drafted, we welcome you to contact us prior to providing a contract to an employee and the agreement being finalised. 

Let us help you and your business navigate your Employment Contracts so you can remove the guess work and potential issues that may occur.

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors such as government legislation changes, may not be up-to-date at the time of reading. It is not legal advice and should not be treated as such.