What is an Employment Contract?
An employment contract, also known as an employment agreement, is a contract that sets out the nature and terms of the relationship between an employer and an employee. Employment contracts can be written or verbal.
The Employment Contract
Yep, you read that right. You can form an employment contract by agreeing over the phone or in person. Nothing needs to be in writing. We don’t recommend verbal contracts but hey, at least you have all the information.
Written employment agreements are important because they set out all the obligations that are expected of the employee. Let’s start with a written employment contract. Before an employee begins work, they usually sign a document that contains information about:
- The duties of the employment role
- The location of the work
- The normal hours of work
- Whether the employee will be employed casually, part-time or full-time
- The period of employment (for example, is the employee only engaged for 12 months or are they employed in an ongoing)
- The rate of pay or salary
- Leave entitlements
- Whether the employee is entitled to overtime pay or time off in lieu for overtime
- Whether there is a probationary (trial) period (now called a minimum employment period) at the start of the employment (usually for three, six or even 12 months)
- The way that the employee will be assessed, during and after the probationary period
- General conduct and performance expectations
What else should be in the Employment Contract?
The contract could contain lots of other information. For example, some employment contracts contain something called a restraint or non-compete clause. Employers use this to protect themselves from an employee leaving and working for a competitor or starting their own competing business.
Verbal Employment Contracts
Sometimes employees don’t sign a written document. Sometimes they start working on the basis of a verbal agreement. If an employer and employee agree in person or over the phone that the employee will do a certain type of work for a rate of pay, this can form the basis of a verbal employment contract. Sometimes an employer will send the employee a letter that confirms what was agreed to verbally.
It is common for employers and employees to form a verbal agreement when the employee’s working conditions are set out in an award or workplace agreement (also known as an enterprise agreement).
Okay, so far so good. Are you still awake? You’ll need to be for this final point…
Implied Terms in an Employment Contract
Employment contracts may include other terms that the employer and employee haven’t agreed to. What? How does that work?
When a term is taken to be included in an employment contract even though it wasn’t expressly agreed to, it is called an implied term. The most common way for a term to be implied into an employment contract is if it is a legal requirement. For example, the Australian government has created minimum work standards (the National Employment Standards) that apply to many workers in Australia. These work standards include the national minimum wage, maximum weekly hours of work and the minimum leave requirements. These standards apply whether employers and employees agree to them or not and are therefore implied into every contract.
It can be tough working out which clauses are implied into an employment contract and which are not.
That’s the Readers Digest condensed version on Employment Contracts – if you have any questions please feel free to get in touch. We would be happy to hear from you.