Does your employment contract measure up?

Employment Contracts and What You Should Know!

An employment contract can be exceptionally detailed and should be prepared and reviewed by an expert lawyer. So, when entering into an employment contract, make sure you know what should be included. Similarly, if you are an employer and using an old contract ascertain when the last review date was; perhaps a review is long overdue! It is clear contracts should be meet the needs of those involved and in reality, both employer and employee should seek legal assistance first before offering or accepting an employment contract.

This article provides a starting point only and attempts to clarify some of the important information all parties should know.

What terms should always be in an Employment Contract?

Naturally, there are some introductory matters. For example, the identity of the parties needs to be set out as well as the duration of the contract (for example if it is for a fixed-term).

The employment contract then needs to specify the terms.

Before the terms are measured, the application of any statutory provisions or award or collective agreement must be considered. Generally speaking, employers and employees cannot contract out of awards or collective agreements.

The following are critical to mention, and the entitlements need to be specified, including:

• The remuneration;
• The frequency of remuneration reviews;
• The period of the employment contract (if fixed term);
• The basis of remuneration adjustment and performance management/appraisal;
• Termination conditions;
• Any professional indemnity;
• Specific employment conditions including
  • hours of work;
  • annual leave;
  • annual leave loading;
  • public holidays;
  • long service leave;
  • superannuation;
  • reimbursement of expenses;
  • sick leave or carer’s leave;
  • parental leave; and
  • other leave.

Additionally, depending on the nature of the employment and industry it may be important to also include:

• Intellectual property;
• Restrictive covenants;
• Professional development and training; and
• The location of employment.

Further, the Statement of duties can be attached to the employment contract. For this attachment to become part of the terms of the contract, it should be expressly incorporated into the contract by a statement. As a result, it makes it part of the contract in the body of the contract itself or as an annexure.

The Importance of Workplace policies

Workplace policies may be incorporated into the employment contract because of the nature of their content, some will not, and it is hard to know what matters a court will find are incorporated. If an employer wants to incorporate policy into the contract, they can expressly do so by reference in the contract.

The difference between employees and contractors

There is often ambiguity in a workers’ status, as to whether they are a true employee of an independent contractor. Employment law differs from other law, such as tax law, on these questions.

There are also significant legal consequences of incorrectly assuming an employee is a contractor or vice versa. In other words, the true nature of the working relationship should be considered at the time of drafting an employment contract or a contract for services.

The importance of Superannuation

The employer is responsible to ensure that appropriate superannuation contributions are paid into the employee’s nominated superannuation fund. Generally, a contractor will be responsible for their own superannuation contributions. However, when offering employment, you should clearly state if that offer includes superannuation.

What are your Implied entitlements?

To clarify, some entitlements and obligations that exist in the employment relationship are implied. This to say, they are not written down or stated, but they still exist.

The implied terms include:

• An employee must exercise reasonable skill and care in their performance of duties;
• A general duty exists for an employee to obey all lawful and reasonable directions by their employer;
• There must be fidelity and confidentiality within the employer/employee relationship; and
• If there is no provision for termination within the contract, then “reasonable notice” for termination must occur unless in circumstances of “serious misconduct”.

Conclusion

When negotiating an employment contract, it is essential for both employers and employees that the contractual arrangements should be specific to the individual, and the terms say what you want them to mean. Therefore, Parties entering into these arrangements are wise to seek legal assistance beforehand to ensure they are right.

In conclusion, if you want to know more or if you run a business and would like your draft employment contracts reviewed, please call us on 02 9955 6692 or email info@hslegal.com.au.