What Information Should Employment Contracts Have?

When hiring a new employee, it is standard for an employer to enter into an employment contract with that employee. Employment contracts are designed to protect both the employer and the employee at the commencement of the relationship; therefore, it is imperative that any new contract entered into covers a crucial set of issues that may arise in the day-to-day dealings of the arrangement.

The period of employment

The period of employment should outline the employee’s start date and hours they are expected to be in the office (or, in the case of flexible working arrangements, the hours they are expected to work). The clauses in this section are particularly important for Fixed Term Contracts, where an employee’s employment will cease at the completion of a particular project or on a certain date. Fixed-term contracts may be extended under the same conditions as the preceding contract, however, the completion date set out in this section releases each party and effects termination of the contract at hand.

The employee’s title and nature of their role

While it is usually impossible to predict exactly what tasks an employee will undertake each day, the outline of the employee’s role and what is expected of them should feature in the employment contract. This includes any travel that may be required and any potential relocation of the role.

The employee’s title should be clearly stated as should any of their direct reports and their supervisor/s.

Remuneration

Possibly one of the most important inclusions of all is the employee’s remuneration.

Typically, this figure is broken down into an annual rate plus superannuation, which is shown at the pre-tax rate. An individual’s personal circumstances (such as investments or a student loan) may alter the rate at which they are taxed so it is not advisable to include the employee’s post-tax salary in the agreement.

Leave entitlements

Leave entitlements including annual leave, personal leave, carer’s leave and parental leave should be outlined in the agreement. Part 2-2 of the Fair Work Act (2009) covers the National Employment Standards and should be referred to when calculating each employee’s entitlements based on their type of employment.

Annual leave

All full-time permanent employees are usually to entitled four weeks (20 working days) of annual leave, except in cases where the employee is a continuous shift worker, where they would be entitled to five weeks of annual leave. Casual employees are not entitled to annual leave, however annual leave loading is factored into their wages.

Unless otherwise specified by way of an industrial instrument, any unused annual leave balance accumulates from year to year.

Personal leave

What was formerly known as ‘sick leave’ is now called ‘personal leave’ and comprises all leave related to caring for someone; including a child, de facto partner or, of course, the employee themselves.

Per National Employment Standards, the annual entitlement for a full-time permanent employee is 10 days which covers leave for both the employee themselves or the days they are caring for another person.

Compassionate leave

Compassionate leave refers to times when an employee’s immediate family member develops an illness, suffers an injury that poses a serious threat to their life or dies.

For each event, an employee is entitled to take up to two days of leave. Similarly to personal leave, an employer is within their rights to request evidence of the event.

Long service leave

The Industrial Relations Act 2016 (Qld) provides the authority on long service leave in Queensland. Generally, the rule is that an employee who has completed 10 years of service with one employer is entitled to 8.6667 weeks of long service leave.

Parental leave

Parental leave is available to permanent employees who have been employed by their organisation for at least 12 months and casual employees who have been employed by their organisation for at least two years. Parental leave allows the employee (if they are the primary caregiver) to take up to 52 weeks of unpaid parental leave. If an organisation offers paid parental leave, the conditions attached to this leave should be clearly stated in the employment contract, as should the appropriate notice period that the employee who is applying for leave is expected to give.

While employment contracts are designed to protect the interests of the organisation and their employees, they are also put in place to ensure the future of the business beyond the termination of the contract. It is reasonable that the following matters would be covered in a standard employment contract.

Confidentiality

While the notion of confidentiality is implied upon all employees, it is a crucial inclusion for employment contracts. Employees should generally act in good faith, meaning that they must work in and toward the best interests of the employer.

It is expected that if an employee is in possession of a trade secret or other information that would be regarded as being confidential, then the employee is bound by a continuing duty to keep that confidentiality even after the cessation of their employment.

Adherence to policies

Many employment contracts require new employees to agree to read and sign policies around bullying and harassment, dress code and social media prior to commencing with the organisation. They will generally include these policies as annexures to the employment contract itself and agreeing to abide by these policies is part and parcel with being a party to the employment contract as a whole.

Minimum notice period

Sometimes, it can be difficult to replace employees quickly and turnover in staff can result in the loss of corporate knowledge, which is a type of invaluable knowledge that each employee has gained through their time working at the organisation. The minimum notice periods as set out by the Fair Work Act can be found on the Fair Work website.

If an employee fails to provide adequate notice to the employer, then the employer has the right to withhold any wages or salary from any monies that are owed to the employee upon termination, such as annual leave entitlements.

If you need assistance with drafting an employment contract, contact one of our HR Consultants at Preston HR.