An employment contract is an agreement signed between a newly-hired employee and an employer for the purpose of outlining the terms, responsibilities, and rights of both parties. Depending on the type selected, they can be used when hiring those that will work on a full-time, part-time, or contracted basis.
Also known as an:
- Employment agreement;
- Job contract;
- Work contract; or
- Contract of employment
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Employment Contract (Fixed-Term) – For hiring an employee for a set amount of time. The start and end date(s) are established in the contract.
Independent Contractor Agreement – Lays out the terms a contractor will be obligated to follow regarding service(s) provided to a client. Binds both parties once signed.
Subcontractor Agreement – A contract formed between a contractor and a subcontractor. Benefits both parties by outlining each party’s obligations to each other.
Employment Contract Addendum – For adding additional information to an employment contract.
Employment Contract Amendment – For altering information in an employment contract.
Non-Compete Agreement – Used for preventing employees and contractors from working with competitors for a specific length of time after their employment officially ends.
Non-Disclosure Agreement – Legally restricts an employee or contractor from sharing a company’s secret information with third (3rd) parties.
An employment contract is a written document completed and signed at the beginning of an employee’s career with a business. The form is popular in many industries and helps employees understand their role and what benefits they can expect in exchange for their hard work. With a standard contract in place, organizations can systemize their disciplinary process, resulting in fair and impartial treatment to those they employ.
While the employer can pick and choose whichever topics they feel is necessary to include in the form, the average employment agreement covers the following:
- Payment (salary/wage/bonuses);
- Employee rules and responsibilities;
- Employment length;
- Dispute resolution;
- Benefits (e.g., insurance, PTO, holidays);
- Grounds for termination; and
- Non-disclosure / confidentiality.
An employment contract should be used whenever a company (or person) wants to exercise greater control over the terms of employment for a specific new hire. Additionally, the employer could use the document as a means of attracting top-quality talent by guaranteeing those that are hired certain benefits, pay, ownership, and so on.
The majority of employment contracts are used for special situations, for employees that are of great importance to the company and/or will have a unique payment structure compared to other workers.
The majority of employees are considered “at-will” in the United States. “At-will” means either the employer or the employee can end their working arrangement at any time (for little to no warning) and for nearly any reason.
Some employment contracts result in the employee no longer being considered “at-will” after signing. This can be due to the contract specifying a specific start and end date or laying out the conditions that make quitting acceptable (for example). So long the “at-will” option is selected on the form, both the employer and employee will retain the ability to terminate employment at any time.
The clauses below can be found in the free document we provide and are essential in forming a comprehensive employment contract:
Employee Duties & Responsibilities
Establishes the obligations the employee will have to the employer. Binds the worker to complying with all of the company’s policies, rules, and so on. Outlines the worker’s job title and the exact duties they will be responsible for completing. This section can be customized to whatever specific procedures a corporation may have.
Arguably one of the most important clauses, this section institutes how long the employee will be working for the entity. While this section can have several layers and cover a lot of ground, the major question it answers is if the worker will be hired on as a temporary worker or a full-fledged member of the team.
Compensation / Pay
Outlines how the worker will be compensated for their work. Covers whether they will be paid on an hourly or salaried basis, the frequency they’ll get paid, if they’ll receive commissions, and whether bonuses will be included.
Also known as a “probationary period”, this optional clause gives employers a means of evaluating whether a newly hired employee is a good fit for the job. The length of the trial period is up to the hiring entity, but will often last anywhere from thirty (30) to ninety (90) days.
By having new hires work on a trial basis, the company can hold off on providing the worker certain benefits (like health insurance, for example), which can save considerable amounts of time if the business anticipates hiring a lot of probationary workers. Furthermore, the trial period gives the new hire a way of “feeling out” to see if the corporation is right for them.
Including a section on confidentiality is highly recommended for companies. While “confidential information” is a broad term that can encompass many areas, it generally refers to information (whether written or spoken) that is not publicly available, belongs solely to the company, and could endanger the company’s competitive advantage if it were to be shared with certain 3rd parties. A major feature of the clause is that it can bind employees to safeguarding information even if they are no longer employed by the business.
For companies that are only looking to protect their trade secrets and other private information (and don’t require the other clauses found within an employment contract), a non-disclosure agreement can be used.
Non-Compete / Solicitation
Similar to the “Confidentiality” section, a “non-compete” clause prevents an employee from working with certain companies and/or working in specific industries after having their employment terminated. This is designed to prevent an employee from:
- Divulging secrets to persons employed by or involved with a competitor;
- Creating their own company and going into competition with the employer (by utilizing learned confidential information); and
- Stealing customers/clients/vendors from the employer.
A standalone non-compete agreement can be used as an alternative to the non-compete clause.