Go to Top

Key Elements of a Solid Employment Contract

Key Elements of a Solid Employment Contract

Building a successful and thriving business takes a lot of hard work, effort, and sacrifices. However, companies need a solid and reliable workforce to ensure smooth daily business operations. As an entrepreneur or an employer, having a solid and flawless employment contract be one of the top priorities. It will help maintain a healthy workplace for employees and protect you and your business from possible lawsuits.

A contract between an employer and employee should serve the interest of both parties. The employer-employee relationship needs to be spelled out in detail to prevent future misunderstandings that might result in a costly lawsuit. If you have to, seek the help of a skilled employment lawyer in writing a solid contract. Remember to include the following essential elements:

Key Elements of a Solid Employment Contract

1. Clear Description of Position – A potential employee should have a clear understanding of the job requirements, like the name of the position, and the duties and responsibilities it entails. Provide complete details on the place and working hours.

2. Terms of Employment – This stipulates the number of years an employee will work in a company. This is especially important when hiring a freelance or contractual position. The contract needs to clearly specify the specific period of time of employment or date the project is to be completed.

3. Benefits and Compensation – Employees are often after what the company has to offer. When stating the benefits and compensation package, carefully lay down the following:

Key Elements of a Solid Employment Contract

 

  • Base wage/annual salary/hourly rate/commission percentage
  • Incentive program
  • Salary raise
  • Medical and dental insurance
  • Retirement plans, profit sharing (optional)
  • Policies on holidays, vacation, sick leave, paid leave

4. Confidentiality Agreement – Successful companies possess trade secrets and client data that they need to protect from their competitors. Having your employees sign a confidential agreement helps safeguard sensitive information from potentially untrustworthy employees who might share them with your competitors.

5. Technology Privacy Policy – Most employees these days have several social media accounts. Unfortunately, social media can easily distract employees from doing their assigned tasks. To prevent this from happening, the contract should specifically prohibits employees from using the company’s computer and mobile devices for personal use, like checking their personal emails and/or updating their social media accounts.

Key Elements of a Solid Employment Contract

6. Terms and Conditions of Termination – To protect you and your company from potential lawsuits with regard to termination, it is important to set the terms and conditions. The contract should also thoroughly explain (using concise and straightforward language) the factors required for either party to end the business relationship between the employer and the employee. One of the essential terms and conditions to include is the period of termination or resignation notice.

7. Severance Pay – When the employer ends the employment contract without “just cause”, the employee is qualified for a minimum entitlement. According to Ontario Employment Standards Act, 2000, the pay in lieu depends on the duration of service or one week per year and is capped at eight weeks’ compensation. However, an employee who worked in a company for more than five years is entitled to a statutory severance pay.

Key Elements of a Solid Employment Contract