Despite the considerable amount of often complex legislation that governs employment relationships in Australia, some readers may be surprised to learn that there’s actually no legal obligation upon employers to provide their employees with a written employment contract.
That doesn’t mean a contract doesn’t exist however: in simple terms, if someone turns up to perform work at your direction, and you pay them, the parties in a strict legal sense have created a contract.
So if we don’t absolutely need them, why do we at HR Success (and others of our ilk) recommend them, and what should they include?
Why have a written contract of employment?
Written contracts of employment are recommended for a number of reasons, including:
- They help to establish a clear and mutual understanding between you and your employee(s), fostering a relationship of trust and transparency.
- They clarify important details relating to the employment relationship, ideally before it commences. Needless to say, it’s important for both parties to be clear and in agreement about such things as:
- the nature of the arrangement (for example, full-time, part-time or casual)
- when the work is to be performed (start and finish times, days of work, for example)
- how much, and when, the employee is to be paid in return for their work, and
- employee entitlements beyond base pay: superannuation, allowances, overtime, leave etc…
Having a documented agreement in place makes it much easier to address any issues that might arise over the course of the employment relationship.
- They help the employer comply with legislative and relevant Award requirements. While we’ve already highlighted that employment contracts don’t need to be in writing, most Awards do require employers to, for example, advise their employee in writing of the appropriate classification of their position in accordance with the Award. Similarly, employers and part-time employees generally need to agree, again in writing, of the number of hours to be worked each day, days of the week on which the employee will work, and the times at which the employee will start and finish work each day.
Given these and other similar requirements (particularly where the employee is covered by a modern Award, which is most employees), it makes sense to figure all this out, ensure and record the agreement of the parties in a formal employment agreement/contract.
In the case of those employees who are correctly deemed to not be covered by a registered Agreement or Award (bonus tip: be careful, there’s not a lot of employees who can be regarded as “Award-free” these days), putting arrangements in writing is even more important given that there’s no Award to fall back on to prescribe detailed arrangements. - They help the employer set clear, specific expectations of their employees, and in turn manage the many risks associated with employment.
By way of example, you can (and should) in an employment contract outline your expectations and requirements in respect of matters such as:
- confidentiality of business-related information
- any restrictions upon the employee taking on secondary employment
- employee performance and conduct
- the need for your employee to hold and maintain relevant licences, qualifications etc… (eg. drivers’ licence, White Card, Working With Children Check), and
- the ability for the employer to direct an employee to attend a medical assessment if there is reason to believe that they may not be fit for duties.
If relevant issues arise in the course of employment (if the employee is found to have shared confidential information, for example), having appropriate provisions in the contract of employment will significantly strengthen the employer’s case if they were to take action against the employee concerned.
For the same reasons, we also recommend that businesses have in place a good set of HR-related policies to clarify their expectations of employees and provide guidance as to how issues might be managed (eg. Code of Conduct, Drugs & Alcohol Policy, Employee Grievance Policy, Work Health & Safety Policy).
So what should be included in a contract of employment?
Employment contracts really need to be professionally drafted in order to ensure that they are “fit for purpose” and include provisions that protect the rights of the employee and the interests of the employer/business.
Generally speaking though, contracts of employment will often include key provisions such as the following:
- Commencement date (and, if applicable, expiry date), and any probation period that might apply
- A reference to any applicable Award / Agreement and classification
- Position title and nature of employment (full-time, part-time, casual, temporary etc..)
- Hours of work for full-time and part-time employees (including specific details if part-time)
- Remuneration, allowances and bonuses to be made available to the employee
- “Set-off” clause(s) if you are paying a salary that is inclusive of items such as penalty rates, overtime payments, annual leave loading etc…
- Leave entitlements and any associated arrangements
- Performance standards
- A reference to the need for the employee to comply with policies and procedures of the business
- Any requirement for the employee to have and retain relevant tickets/licences/qualifications (including a drivers licence if applicable, plus any terms related to provision of a company vehicle)
- Termination provisions, where termination is at the instigation of the employee or employer (particularly important for senior or award-free roles)
- Confidentiality requirements (Bonus tip: it’s no longer legal to include terms requiring employees to keep their remuneration arrangements confidential, though you can of course include provisions relating to confidentiality of business/client information)
- Any post-termination obligations that you might seek to apply to the employee (for example, restraints on working with a competitor for a period of time etc…)
Your contract should also include provision for the parties to the agreement to sign as having understood and accept the terms of the contract. It’s a good idea to also include a term by which the employee acknowledges that they have also receive a copy of the Fair Work Information Statement (and any other information statement that might apply in the case of casual or fixed-term employment).
The above list is by no means exhaustive, but it does give an idea of the types of provisions you should aim to include in order to reap the benefits of having a written contract of employment: shared understanding, compliance, setting expectations and managing risks.
As you might expect, drafting contracts of employment is “bread and butter” for us at HR Success, so be sure to reach out if you need support to draft or review your contracts, or would just like to have a chat about the options.
Of course, there are lots of other service providers out there providing a similar service, so by all means shop around, though please do take care if you choose to use an “off-the-shelf”/template product. While these can certainly be useful, in our experience you really need to have some level of background knowledge and experience in order to use them effectively (and compliantly!).
This information is of a general nature only and relates to employers/employees under the Fair Work system (which is most employers/employees), It is not formal or legal advice. Information is we believe current and accurate at the time of publication – 06/11/2024.