Understanding Employment Contract


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3 minute read

Employment Contracts: Key Elements You Need To Know

Crafting employment contracts requires a delicate balance. As an employer, the language used needs to protect your business. At the same time, it needs to respect the rights of the employee. Contract lawyers approach these agreements with the goal of equitably serving both parties. To do this, they ensure that the following critical elements are always included.

Description of the Position

This clause of the contract needs to spell out what position the employee is meant to fill, including all their essential duties and job requirements, as well as the locations where they will be working and the hours of employment. The language here should be kept as brief as possible without sacrificing clarity. The employee should be able to read this description and fully understand your expectations of them.

Performance Metrics

While the position description should let the employee know what they are expected to do, it should not get into how performance will be evaluated. This should be addressed in a section on performance metrics. Consider things like skills you want to see develop during their employment, sale volume expectations, and how you will measure growth.

Length of the Agreement

An employment contract must have a start date to specify at what point the employee will be held to the terms of the agreement. It is also critical to have either an end date to the contract or a renewal date. Since your needs and the needs of your employee will change with time, you should not opt for an open-ended contract.

Terms of Compensation

For the employee, the terms of compensation are easily the most critical element of the employment contract. The base wage should be specified as well as whether it is salaried, hourly, or commission. Overtime policies should be clarified here as well. If you have an incentive program, it is also a good idea to outline it here.

Employee Benefits

Outline everything included in your employee benefits package. This should include sick days, holidays, vacations, stock options, profit sharing, retirement savings, and insurance. When it comes to insurance coverage, be clear on the percentage of premiums the employee must cover. If there are any stipulations to coverage, such as laving specific licenses, paying dues, or maintaining a membership, clarify who pays for these and when they must be paid.

Termination and Severance

Not every employee is going to be a good fit for your company. That is why your contracts need to specify how termination and severance is handled. Outline what will happen is the employee is let go with cause and without cause, explaining the severance terms for each possibility. Also go over specific instances that constitute cause for termination.

Getting Help From Contract Lawyers Near You

The best way to ensure your employment contracts are iron-clad is to work with a contract attorney. Contracts Counsel is a boutique marketplace that allows you to get quotes from vetted attorneys who grasp the nuance of your industry. Work with ContractsCounsel.com for legal assistance that doesn’t break the bank.

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