What Should be Included in an Employment Contract?

Employment agreements, or employee contracts, are legally binding documents that define the relationship between a worker and an employer. The document covers rights, responsibilities, and the obligations of both. It’s a tricky field of law simply because the rules governing labor relations vary by state and federal law. This blog will lay a baseline for what you should include in an employment contract.

What Should You Typically Include in an Employee Contract?

What is Included?

What you include in the employment contract may change depending on your type of business or the type of relationship you’re trying to define. However, generally, you should spell out:

• The length of employment.
• The employment status (full-time, hourly, contract).
• Any benefits the employee receives.
• If they have access to sick days or vacation.
• The potential grounds for termination.
• If you have a non-compete and what those terms are.
• Any nondisclosure of information terms.
• Assignment clauses that say any patents the employee develops during his or her tenure belong to the company.
• How to mitigate any employment-related disputes.
• Pay, including commissions and bonuses or profit-sharing.
• Stock options.
• Anything else relevant to the new hire.

Benefits and comp should be in the contract, defining what’s paid and when. The caps on bonuses should be listed. Paid time off should be specific, along with the other benefits you offer.

Just as important as what you do say in the employment contract are the things that you should not or cannot include.

What to Leave Out of the Employment Contract?

You can list the duration of the job (“anticipated to be six months”); however, the keyword here is “anticipated.” You don’t want to create misconception around your right to terminate the employee or contractor in an at-will state. If you put in a timeline, it implies a contract so that you may be required to pay the employee for the full term, even if they’re terminated.  

We also suggest leaving out the grounds for termination, as it will limit your ability to fire a worker just for those reasons alone. If you’re sued for wrongful termination, the court may see these terms as required cause for letting someone go.  

Need More Information About Employment Contracts?

There are advantages and disadvantages to the employee contract. It’s a tricky area of your business to navigate. The easy way out, though, is to let FoxHire handle the employment relationship. As an Employer of Record (EOR) we offer our clients the peace of mind in knowing that the employee relationship is both carefully and legally defined. Find out how we can help your business. Contact us today.