5 Things To Include in an Employment Contract

Every successful business starts with great employees. Hiring new talent may seem like a simple arrangement. But unless you do it properly, you could end up with disagreements and legal battles to contend with.

Outlining the details of an employment contract is a critical part of the hiring process. You want to make sure the process is transparent and all parties are on the same page.

An employment contract protects you, your company, and your new hire. Whether you’re just starting out, growing your business, or expanding abroad, there are a few critical areas to focus on.

Here are 5 key things to include in a contract employee agreement.

1. Job Information

You don’t want there to be any misunderstandings about what the job entails. Define the role and the responsibilities of the position for new employees.

Key information to include:

• Job title and description
• Role requirements
• Skill requirements 
• Team and department assignment
• Compensation package
• Performance evaluation 
• Flexible working options

The compensation for the position should be clear and outlined in detail. This should include:

• Salary
• Benefits
• Bonuses
• Incentives

Every business is different. However, there are common protections that employees expect and deserve. Include information about medical and dental insurance, stock options, savings plan, time off, sick days, vacations, and other relevant information pertaining to the position.

2. Non-compete

Don’t underestimate the value of a non-compete clause. It’s significant for the employee and employer.

As an employee, you want a non-compete clause that won’t restrict you if you choose to leave for another job. It should not prevent you from working in any particular field or constrain your rights or ability to make a living.

As an employer, you have to protect yourself when an employee leaves or is terminated. Every business has proprietary information that must be protected.

Whether it’s a secret process, formula, recipe, client data, or other valuable information, a non-compete agreement is in the best interest of your business. If you don’t want them working for a competitor for a year or two or sharing your secrets, you must be willing to pay them severance for the courtesy. 

You don’t want current or former employees blasting your company on social media either. Consider including language regarding social media guidelines as a condition of employment.

It’s crucial to have language in an employee contracts that safeguard intellectual property and insider knowledge about your company. 

3. Severance

When you need to let an employee go, a severance package softens the blow. You must outline in detail the type of severance package they can expect.

This should include information about the amount and duration of severance pay. If bonuses are a factor, this should be included as well.

Another important aspect of severance is health care. Will they receive company health benefits for a time or have access to COBRA? 

Some severance packages include help with job placement through an outplacement firm. This is a common severance option for senior employees.

4. Non-solicit

It’s common for executives and those in management roles to recruit talent to follow them to a new company. As an employer, you don’t want to lose your top talent for any reason.

This is where a non-solicit clause comes in. It restricts your former employees from recruiting and hiring your current employees.

Employee retention is always a major concern. Losing multiple employees costs you time and money.

A non-solicit clause protects you, your business, and your bottom line.

5. Termination 

This part of an employment contract focuses on the reasons a company may terminate an employee and what that means for the employee and the company.

Some options to consider include:

Voluntary Termination

Every business owner must be prepared for some amount of turnover. Include information about what happens when an employee makes the decision to leave the company.

Termination for Cause 

This clause pertains to an employee who is let go for not fulfilling the responsibilities of the job in a satisfactory manner. Firing an employee can be tricky, especially when that employee receives regular bonuses.

Employers may try to avoid paying bonuses when it’s not clearly defined. Employees should look for a specific and narrow clause that outlines what constitutes “cause” for firing and what they can expect if it happens.

Termination for Convenience 

With this clause, an employer has more freedom for termination for any cause. In doing so, the employer is required to provide a complete severance package for the terminated employees.

Constructive Termination

This type of clause involves an employee’s job that has evolved to the point where they are no longer doing the same work. Their job responsibilities have been taken away.

This is essentially “job shrinking.” They may have the option of staying with the company in another capacity or leaving with full severance pay.

What to Include in an Employment Contract

Nothing beats a great employee. But when disputes happen, things can get messy pretty quickly.

An employment contract outlines the terms for employment and protects you and your employees. Unless you have a solid employment contract in place, you could put yourself and your business at risk. 

At Bradford Jacobs, our vision is a world of opportunities without limitations for everyone. We deliver comprehensive employment services, allowing businesses to focus on their core objectives.

We believe everyone deserves equal access to the resources necessary to achieve their goals. And we’re ready to help your business do just that.

Contact us today to see how we can help you reach and expand your business goals.