Employment contracts form the basis of the relationship between an employer and an employee. It sets out and details all aspects of the employment relationship, from basic things like job hours and duties and job responsibilities to the more nuanced aspects of an agreement, which may include end-of-term benefits, details about severance packages, and other terms that may or may not be known by the general public. However, understanding employment contracts is half the battle; once you understand what aspects need to be covered, both employers and employees can negotiate a mutually beneficial contract that helps the company retain a good level of talent and provide exemplary compensation and working experience for the employee.
In this blog post, we will discuss the basics of an employment contract and how it sets up the stage for a relationship between the employer and the employee. We will also be discussing the contract to understand what every employer and employee should know about employment contracts and what constitutes a good contract that can help both companies and employees make the most out of their efforts and work towards a mutually beneficial situation.
Let’s start by understanding what a basic employment contract is.
Employment Contract: What Is It?
An employment contract can be simplified as a legally binding document that not only serves as the benchmark document in listing out and detailing all aspects of an employment opportunity but also stands as the legal document that either party can use to their recourse should the other party fail to adhere to the rulings as listed by the agreement. The agreement is a comprehensive document that has all the details of the work agreement, from working hours to other mundane or otherwise illegible details, and people oftentimes make the mistake of not reading. It is important to note here that employment contracts can be both verbal and written, and that does not affect their legality or their enforceability as long as both parties have agreed to the terms of it beforehand.
Why Is An Employment Contract Imperative?
Companies and individuals with experience under their belts seem very uptight about employment contracts, as they should. Newcomers in a certain industry or office may find it off-putting as to why several pages need to be signed and read through carefully, and here are some reasons that can help explain why an employment contract is so imperative for not just the employee but also the employer.
- Sets rights and responsibilities
Employment is a two-way road; an employee works and performs for the benefit of the employer, and the employer ensures that not only is the employee fairly compensated for the services but also enjoys other perks and benefits the employer offers with the position. In short, an employment contract sets out the foundation of the responsibility; namely the rights of the employee, and what responsibilities are expected from them in service of the employer. This is central to a good and sound employment agreement, and both employers and employees are actually encouraged to review employment contracts from time to time.
- Protects both parties
Times are not always perfect, and employment contracts are both a reminder of this truth as well as the perfect solution for this. During the course of employment with an employer, either party may commit an act that may be perceived against the terms or spirit of the employment agreement. When this happens, the other party may require a recourse that sets the relationship either back to square one, or terminates the relationship at all without any negative fallout for the party that did not commit the transgression. In this manner, whether it’s the employer or the employee, an employment agreement protects both parties from the ill effects of breaking an agreement and makes the other party legally responsible and liable.
What Does An Employment Contract Include?
As explained beforehand, employment contracts are comprehensive pieces of legally binding documents that detail and state each and every aspect of the job agreement to ensure that these details have been vetted and agreed upon, to remove the objection that any clause or point may have been added without the knowledge of the other party. For this, we will enlist some of the features of an employment contract, more specifically, what it states and what it contains in its entirety.
- Parties involved
The first and foremost are the parties involved, which every employment contract lists out at the start of the document, and depending on the language being used in the document may refer to them using other names or monikers (like employee and employer). This basic point reiterates the need to document all aspects of a job agreement.
- Job information
Arguably the most crucial part of an employment agreement, the job information and detail section enlists all the details about the job itself. This section usually contains agreements and points like work hours, work details, job responsibilities and other practical aspects of the employment that need to be documented and agreed upon by both or all parties involved.
- Remuneration, perks, benefits
This part is crucial for an employee, and they should definitely spend some time going through this specific part of the document. This part, as the name suggests, deals with the remuneration or compensation section of the employment agreement. Whether it’s an executive-level employment or a blue-collar one, this section lists out the remuneration, perks, and benefits that come with the position, and a good tip is to compare this section with the actual job listing. This section usually also states the salary cycle, which details how often the company disburses the remuneration.
- Employee classification
If an employee is working part-time or full-time, is on a contract, or any other way, the employee is classified within the internal structure, and the hierarchy of the corporation needs to be stated on the contract. It should also explicitly list any associated points that may come as part and package of the employee classification and should state the terms of employment as well.
- Timeline of employment
Many companies hire on the basis of projects or hire only for specific products. In said employment contracts, the section that deals with the timeline of the employment should state clearly the timeline of the employment, or from which period to which period the employee will be with the company. This, once again, protects both the employer and the employee.
- Non-compete, confidentiality clauses
Many companies working for the government, the military, or other factions focused on research might include clauses that restrict the ability of an employee to join a competitor of the company once they have left their current employer. Similarly, confidentiality clauses restrict the employee from divulging certain aspects of their employment to people around them, which is something seen frequently in military, intelligence, government, and military contractor employment contracts.
- Termination
Finally, the contract also needs to stipulate how the exit of the employee will happen clearly; it lays out the terms and the conditions for an employee’s exit from the company, be it out of their own volition or due to them violating a policy of the company. This section usually also deals with end-of-term benefits and whether the departing employee will be eligible for these benefits.
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