An employment contract is a legally binding document that sets out the terms and conditions of employment between you and your employee.
All employees who are eligible to work in Australia are automatically covered by the NES – regardless of whether they sign an employment contract.
An employment contract is the most effective way to establish the terms of your employment relationship. It should outline everything the employee has to know about working for you including employee rights, working hours, remuneration and more. Doing so will greatly reduce the risk of misunderstandings or confusion.
When writing a letter of employment make sure to have it reviewed by a legal expert who specialises in employment law. If any of the terms are vague, unclear or unlawful, they will tell you about it and make suitable changes to ensure the document is compliant.
Although every employment contract is unique, there are crucial elements that should be included in an agreement, regardless of your company size or industry. Here is a sample of employment contract terms to include:
Each type of employment contract has its own pros and cons.
Which type of employment contract that is right for you will depend on your specific business needs. You should also consider the industry standards of each role and how the arrangement will affect your tax obligations too.
Below are the most common types of employment arrangements:
Full-time employees have ongoing employment and work an average of 38 hours per week. However, the number of hours per week may differ based on the nature of the industry and the agreement itself.
Part-time employees have ongoing employment and typically work less than 38 hours a week. They usually work regular hours each week and are entitled to the same employment entitlements as full-time staff. However, the part-time arrangement is on a ‘pro rata’ basis.
Casual employees work for an employee on a demand-only basis. Unlike a permanent agreement, casual employee rights mean they have no guarantee of ongoing employment (so the work hours are irregular) and they are not entitled to paid sick or annual leave. Casual employment contracts can be terminated at any time without notice.
When an employee is hired for a specified period of time. Typically the contract ends either when a project is complete or an event as passed (eg a peak season). Fixed-term contracts clearly outline the length of the employment period from start to end. Although this type of arrangement is often short-term, fixed-term workers still receive the same entitlements as permanent employees.
Independent contractors are typically self-employed workers who contract their services out to other companies. Contractors negotiate their own fees and working arrangements and they have the freedom to work for multiple employers at once. It’s important for an employer to clearly define whether the person they hire is a permanent employee or independent contractor.
An employment contract can be terminated by either the employee (ie through a resignation) or the employer.
Regardless of what triggered the termination, the correct procedure must be followed to ensure the process is fair and carried out in accordance with the workplace procedures. Depending on the circumstances, if an employee is dismissed or resigns, they must be given their final payment, which is calculated based on any entitlements owed to them eg accrued but untaken annual leave.
Make sure you clearly outline the terms relating to ending employment in your employee handbook.
Employsure advisors can review your employment contracts and provide recommendations to ensure they comply with employment law. For peace of mind, please contact Employsure on 1300 651 415 to learn more.