Employment contracts are crucial for defining the relationship between employers and employees. They set out the terms and conditions of employment, ensuring clarity and legal compliance. Here are the top 14 tips for drafting effective employment contracts:
- Understand Industrial Instruments: Most employees in Australia are covered by modern awards or enterprise agreements. It’s essential to understand these instruments and their classification levels to draft compliant contracts.
- Employment Status: Clearly define whether the employee is casual, part-time, or full-time. Ensure the contract reflects the correct employment relationship.
- Fixed Term vs. Maximum Term Contracts: Use maximum term contracts with notice periods rather than fixed term contracts to avoid being locked in to full term, potential unfair dismissal claims and pay-out penalties.
- Probation vs. Qualifying Period: Include a six-month probation period to match the qualifying period for unfair dismissal under the Fair Work Act. Avoid extending probation periods.
- IP, Confidentiality, and Restraint Clauses: Include comprehensive clauses for intellectual property, confidentiality, and post-employment restraints to protect the organisation.
- Remuneration: Clearly outline pay rates, allowances, commissions, and bonuses. Avoid including commission and bonus structures within the contract; use separate documents for these.
- Fitness for Duty: Include clauses for fitness for duty, drug testing, and medical assessments to ensure employees meet health and safety standards.
- Deductions: Be cautious with employee deductions, especially on termination. Ensure deductions are lawful and do not affect statutory entitlements.
- Notice Periods and Garden Leave: Define notice periods and garden leave arrangements clearly to manage terminations effectively.
- Work Location and Reporting Line: Specify the work location, job title, and reporting line by position title, not individual names, to avoid frequent contract updates.
- Policies and Position Descriptions: Ensure compliance with company policies without incorporating them into the contract. Similarly, refer to position descriptions without making them part of the contract.
- Individual Flexibility Agreements (IFA): Use IFAs to vary award conditions, ensuring compliance and better overall terms for employees.
- Casual Contracts: Draft separate contracts for casual employees, clearly outlining pay rates, casual loading, and entitlements to avoid misclassification.
- High Income Earners: Include a guarantee of annual earnings clause for high-income earners covered by awards to provide certain benefits and avoid unfair dismissal claims.
- HR Consulting: To help organisations meet their HR compliance and strategic needs by providing workplace strategist services.
- HR Team Service: Outsourced HR services tailored for SMEs with 30 to 300 employees, including HR health checks, plan development, and implementation.
- com.au: Online subscription service with tools, templates, and webinars to support your HR needs.
- Recruitment: Recruitment services for consulting or HR Team service clients.
- Books: Resources like “The CEO Secret Guide to Managing and Motivating Employees” and “Start and Scale Your HR Business” available on our website.
Claire Harrison is the Founder and Managing Director of Harrisons, a flourishing HR consulting business that sprouted in 2009 from Claire’s passionate belief that inspiring leaders and superstar employees are the key success factor to any business. With over 20 years’ experience, Claire has worked as a HR Director of multi-national organisations, as a Non-Executive Board Director, and a small business owner. Claire’s corporate career includes working with companies such as BHP, Westpac, Fonterra and Mayne Nickless.
