Contracts are often the most critical part of a job, so it’s crucial to understand them and their impact on your career. This blog post introduces how contracts work in employment contracts and what they mean for you. Finding appropriate applicants to fill vacant roles at your company may be a difficult task in and of itself. However, once you’ve identified the right match, you’ll need to employ them formally to finish the process. Employment contracts are an excellent method to define expectations and criteria for new employees in writing. These agreements aid in the protection of both employers and workers. A well-written employment contract sets the tone for success and clarifies all essential components of this new partnership.
What is the definition of an employment contract?
An employment contract is a legally enforceable written agreement that describes the working relationship between an employer and an employee. Employment contracts aren’t required as part of the recruiting process, but they exist in various forms and sizes. A formal offer letter and a signed employee handbook may be sufficient to cover all bases in many circumstances. On the other hand, it assists in reducing uncertainty in the relationship and clearly describing what is expected of both the employee and the employer; therefore, it’s usually in your best interest to develop one.
Employment Contracts: The Fundamentals
Every recruit will have their employment contract terms. Here are some of the most frequent components to include in a contract of employment:
Job Description, Responsibilities, and Duties
Every employment contract must include this provision. The job’s requirements and duties must be clearly stated in the paper. Rather than concentrating on the position’s day-to-day activities, focus on the position’s overall expectations and obligations. You don’t need to include specifics like “accept client orders” and “deliver food to the tables” in this portion of the contract if you’re employing a food server, for example. For starters, there are certain aspects of the profession. Furthermore, if you provide too many precise specifics, workers may reply, “that’s not my job” when you ask them to perform anything.
Conditions of Employment
Conditions of Employment typically fall into one of three categories—full-time, part-time, or fixed term. The majority of companies consider 40 hours to be full-time employment. However, each state’s legal definition of full-time work differs. Some states, for example, define full-time employment at 32 hours per week. Part-time work is usually between 20 and 30 hours per week. However, it may be anything less than full-time in that state. Both full-time and part-time Conditions of Employment are defined permanently with no predetermined end date. Employees engaged on a fixed-term basis are only employed for a certain period. The contract will include a start and end date for this partnership. A fixed-term employee, unlike independent contractors, is regarded as a regular employee for the period of the contract. Some employment contracts specify the days, hours, and other aspects of an employee’s schedule. This is particularly true if the employee must work unusual hours, such as evenings and weekends. A termination clause could be included in the Conditions of Employment as well. Otherwise, add an “at-will” employment condition. This implies that any side may end the relationship at any moment, with or without reason. “Other employment” is another term that might be used here. Many government workers, for example, are prohibited from doing a second job that interferes with their official responsibilities.
Compensation
Payment terms are, of course, an essential aspect of every job contract. This section must precisely state the employee’s compensation, wages, or commission that the two parties have already agreed upon. Include details on salary intervals, bonus structures, and stock options in the contract. All employee perks you’re giving as part of the job should be included in the remuneration section. This might include things like 401(k) match, health insurance, dental coverage, commuter benefits, family and medical leave, health savings accounts, and more. Include those perks that you are confident will be available for the new hire’s employment term. It’s advisable to keep extras out of the contract if they’re vulnerable to change. A severance compensation provision may be included in specific employment contracts. While you’re not obligated to provide severance pay, it might help workers feel more at peace about signing the contract.
Post-Employment Contracts
Any requirements that the employee and employer must follow after the agreement ends should be included in the contract. For example, a non-disclosure, non-solicitation, or non-compete agreement may require particular workers. This prevents them from stealing customers or exchanging trade secrets. These agreements will differ depending on the company and role at hand. A non-compete deal, for example, may prevent a lawyer working for a legal firm from establishing their practice within 50 miles for two years after leaving the company. When creating these sorts of papers, always speak with an experienced contract attorney to verify that they’re legally enforceable and that you’re obtaining the protection you need. Any defects in these papers might be used against you in court.
5 Ways to Make Your Employment Contracts Better
Creating employment contracts may be intimidating, particularly for a novice. These five tools, on the other hand, can make your life a lot more straightforward as you go through the process:
1. Rocket Lawyer
Rocket Lawyer is a market leader in the field of online legal documents. They provide legal services to small and mid-sized firms, ranging from incorporation to document generation. You may establish as many employment contracts as you need for only $39.99 per month. Rocket Lawyer is also available for $39.99 per document for low-volume customers. However, the monthly cost is a better deal since you’ll also have access to certain legal services. NDAs, non-competes, non-solicitation, and other agreements may all be handled with Rocket Lawyer. A seven-day trial is available for free.
2. LegalZoom
LegalZoom has served more than 4 million people and 2 million companies, making it one of the most widely used online legal services. You can modify employment contract templates in minutes using the platform. LegalZoom will auto-fill the employment contract for you once you answer a few easy questions. LegalZoom includes contracts for non-disclosures, non-solicitations, non-competes, and any other legal paperwork you could require throughout the recruiting process, in addition to employment contracts. You may also speak with one of their legal professionals to receive answers to your inquiries and check that the contracts are lawful. LegalZoom’s business plans start at $31.25 per month.
3. BambooHR
BambooHR is a comprehensive human resources system that includes recruiting, hiring, and onboarding new employees. The program has an electronic signature capability built in to assist you in speeding the onboarding process. You can more effectively disseminate employment contracts and gather signatures from recruits. The program includes digital signature alerts and bespoke procedures to guarantee that this process runs as smoothly as possible. All employee contracts and other sensitive information may be saved in your BambooHR employee database after they’ve been onboarded. To get started, contact BambooHR for a free pricing quotation and demo.
4. PandaDoc
PandaDoc has you covered if you’re ready to construct an employment contract but don’t know where to begin. You may receive a free employment contract template from this portal. It’s just a question of filling in the blanks for your company and recruiting, and you’re ready to go. You may use PandaDoc’s e-signatures and custom workflow tools to get the most out of it. Because the program is a complete contract management solution, it comes with a slew of useful features to make your life simpler. Plans start at $19 per month, with a 14-day trial period.
5. DocuSign
DocuSign is the most well-known name in the electronic signature industry. Over 750,000 clients have utilized this platform to enable hundreds of millions of signatures throughout the globe. Electronic signatures and contract lifecycle management are made easy with this program. DocuSign is a service that allows businesses to transmit, sign, and collect signatures for employee contracts. Whether you need to recruit a single person or a large group of people, DocuSign has you covered. Plans start at $10 a month, and you can test it out for 30 days for free.
Creating Employment Contracts: 4 Tips
Follow these simple guidelines and best practices to get the most out of your employment contract experience. These easy tricks will make your life much simpler as a novice.
1. Use a template for an employment contract.
Creating a legal document from scratch is scary, and it’s not something I cannot confidently advocate. Start with an employment contract template instead of working harder than you need to. These papers are available from various internet sources, including some of the tools mentioned previously in this tutorial. It’s just a question of filling in the conditions of employment for your company and that person from here. You may always add, remove, or change these templates to suit your requirements. You may reuse most of the first template when you’ve finished changing it. There will be a lot of boilerplate stuff on there. In many circumstances, all required is to change the employee’s name, start date, and payment information.
2. Consult an attorney.
The majority of company owners and HR representatives are not lawyers. If you’re drafting a legally binding contract, you should consult with an attorney. Many individuals attempt to draw an employment contract independently but often overlook important factors that put the company in danger. The paperwork is so shoddy that it would never stand up in court in other situations. Make a five-minute phone call to avoid these difficulties. You may also have a live conversation with a lawyer online. Even if you wish to draft the paper yourself, get it reviewed by a lawyer before delivering it to the new hire for signing. A lawyer may be more costly, but this expense pales compared to the difficulties and possible costs of a faulty contract.
3. Before drafting a contract, think about the situation.
As previously stated, a contract is not required for every employee. If the employee doesn’t need it, you may save a lot of time by avoiding the contract entirely. For example, you probably don’t need a lengthy, formal legal agreement if you manage a neighborhood ice cream business and employ college kids part-time over the summer. However, an employment contract might be preferable if you’re a mid-sized marketing business looking to hire a new CFO. Employment contracts are also appropriate for individuals who will be doing a highly particular knowledge-based or skills-based job. This is particularly true if they are working with confidential data.
4. Be adaptable.
It’s critical to realize that a job contract is not a one-way path. The agreement ensures that both the employee and the employer are protected. Unfortunately, some company owners mistake being too explicit in a contract that helps them right away, only to find out later that the agreement no longer meets their requirements. For example, consider the following scenario: you employ someone full-time on a two-year contract. However, six months later, your company grows, you restructure, and you determine you no longer need that role. If the employee maintains their half of the bargain, firing them without reason might violate the contract. As a result, try to avoid committing to precise parameters that may alter in the future.
What Should I Do Next?
Now that you’ve learned the fundamentals of an employment contract, you may start drafting these papers for recruits. Take advantage of HR software for expanding firms that want to optimize every part of the recruiting and onboarding process. The finest HR software will assist you in streamlining your recruiting processes and managing the whole employee life cycle. You should also invest in a robust contract management system if you’re going to utilize e-signatures and deliver several papers beyond a single employment contract (such NDAs, non-competes, and so on).
Frequently Asked Questions
What are the five core terms of employment?
A: Five core terms of employment are the following:
- The Employment Contract.
- Job Description.
- Standards and Guidelines for Staffing Positions.
- Employee Handbook with Policies, Procedures & Expectations (EP&E).
- The Applicant Guidebook
How do you write a simple employment contract?
A: An employment contract is a legal document that defines the terms and conditions under which someone works for an employer. This includes things like salary, holidays, breaks, etc.
What are the four types of employment contracts?
A: There are four types of employment contracts, and these include an individual contract, a group contract for independent contractors, a collective bargaining agreement (CBA) that is between labor unions and the company they work for, or as part of an employees benefits package.
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