To have or not have a contract of employment

In Australia, you can legally hire staff on verbal agreement only. But what happens if there is a dispute over someone’s rights and obligations in the workplace? What can you do as an employer? Well, if nothing is written – not so much.

Without a written contract of employment, companies can face serious risks and challenges. Everything from salary to working hours can become contentious.

To help you run your business stress-free, here we go over some of the key information you need to know about employment contracts. We also look at why it’s a smart decision to have them. Let’s dive in!

What is a contract of employment?

A contract of employment is a legal agreement that specifies the terms and conditions between an employer and an employee.

According to the Fair Work Act 2009 (the Act) and the National Employment Standards (NES), the contract must include crucial clauses such as the work description, salary, obligations and rights of both the employer and the employee, as well as other information we’ll address later in the text.

The contract of employment can be either verbal or written. However, as previously said, written agreements provide major benefits. The best employment contracts explicitly define the working relationship, covering all relevant details so that both parties understand their responsibilities and entitlements.

Why should you have an employment contract?

Now, you might be thinking: Why bother creating a contract of employment if it isn’t mandatory in the first place? After all, it takes time and usually requires legal assistance, which also entails financial investments.

And we must admit that it takes a certain amount of devotion to construct a valid employment contract. However, the advantages far outweigh the effort required to create it.

Here are the top three reasons why you should have a written employment contract.

Avoid the “she said – he said” debate

It’s tough to prove the terms and conditions of employment if there is no written contract. When issues emerge, it will be your word against theirs. And that’s not the greatest strategy to win the case in court.

On the other hand, with a written employment contract, you ensure that you have clearly outlined the rights and obligations that both parties agreed to in the event of a disagreement. This way, you can be at ease knowing that you have legal proof that you can use to protect your business from potential employment disputes.

Establish your company as a trustworthy employer

A written employment contract is advantageous for both your employees and your company. This way, they have plainly explained information about their obligations, protecting them from unfair payment and treatment. The contract of employment also includes conditions addressing employment termination and other essential matters to guarantee the administration of the employee’s legal rights.

Providing written employment agreements establishes you as a trustworthy employer, which helps in attracting top talent. Contrary, without a written contract, you risk facing a complicated recruitment process. For instance, a potential employee might worry that the company is withholding some aspects of the job description or working conditions.

Contract of employment allows efficient compliance with the law

The NES applies to all employees in Australia, regardless of whether they’ve signed a contract of employment. However, a written agreement demonstrates that your company truly adheres to NES.

The point is an employment contract must include the legal minimums specified in the NES, so having a written document allows you to demonstrate to employees and authorities that you comply with the law.

What does a contract of employment include?

Here are a few essential points you need to include in every employment contract.

  • Pay terms ― Besides salary, include any overtime and bonuses.
  • Job description ― Describe the employee’s responsibilities. A detailed job description makes it easy to determine if your staff is accomplishing their obligations or failing to do so. (this would be in a schedule to the contract not included in the contract – Generally, it is best practice for employers to ensure that position descriptions do not form part of employment contracts. Using a position description together with an employment contract may limit an employer’s ability to change the employee’s role once their employment commences)
  • Type of contract ― State whether it’s a permanent, casual, fixed-term, or maximum-term contract. Learn more about these in our article on the importance of a contract of employment.
  • Confidentiality terms ― This clause covers sensitive data within your company. It outlines what information is confidential and the consequences of mishandling it.
  • Termination conditions ― Outline the circumstances and reasons considered valid for termination.
  • Hours and leave details ― Include the required working hours for employees and the leave they are entitled to (e.g. annual leave, sick leave, paternity leave, etc.).
  • Intellectual property clause ― Specify who owns the intellectual property in your company and how to deal with it.

Keep in mind that the contract of employment can’t include provisions that fall below the minimum requirements outlined in the NES. Additionally, it can’t feature anything illegal, offensive, or confusing.

Draft professional and trustworthy contracts

We hope the information above has made it clear that, even though a written contract of employment isn’t required by Australian law, it’s crucial to have this document.

By outlining the obligations and rights of both the employer and the employee, the employment contract provides stability and legal protection essential for modern business success.

So, are you ready to draft your employment contracts?

If yes, contact us today. Our experienced consultants are more than ready to assist you in creating potent contracts tailored to your company’s needs and requirements.