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An employment contract template is a legal agreement between an employer and employee. This agreement clearly specifies the duties, obligations, and terms of engagement during their working relationship. Other names of this contract are job contract, Employee contract, Contract of employment, and Employment Agreement. An employment contract includes the following information;
- The names of employee and employer
- Salary
- Period of employment
- Benefits
- Responsibilities
- Hours of work and other agreed terms
Pros and Cons of an Employment Contract:
The pros and cons of an employment contract are the following;
Pros:
- In the employment contract, the roles and obligations of the employee are clearly outlined. The employee also easily understands what is expected on the job.
- According to the contract, the employee cannot disclose any business secrets to the competitors. Thus, this document also protects the Employer.
- Under a stipulated time, since the best employees are tied to a company, this contract provides stability to the company.
Cons:
- Due to the contract, the employer couldn’t terminate the employee who is not performing and has not breached any section of the agreement.
- There are repercussions when either party breaches the contract since this contract legally binds both parties.
- Both parties must renegotiate the terms of the agreement in order to make any change in the employment contract. This results in more legal costs.
Different clauses inserted in the employment contract:
The employer inserts the following clauses in the contract to protect him or herself from any incidences that might occur which may lead to losses;
Non-compete clause
During and after terminating the employment contract, this clause prevents an employee from working for another business competitor. When the employee has terminated the contract, this clause is effective until a specific time.
Non-solicitation agreement
This agreement forbids an employee from motivating the other employees or clients to shift to another direct competitor company. This agreement is usually valid for 1 to 3 years from the end date of the employment contract.
Confidentiality clauses
During the period of employment and even after the end of the employment contract, this clause forbids an employee from sharing confidential information that is relevant to the company. These clauses are commonly valid for a specific period.
How to prepare an employment contract?
Follow the below steps to write an effective employment contract;
Declaration of employment:
In the declaration of employment, include the following details;
- Employment start date
- Employer name
- Employer and employee address
- Employee name
- Terms of employment
- Schedule
- Duration of employment
Statement of responsibilities:
A statement of the responsibilities should be stated in the contract such as;
- General responsibilities
- Confidentiality
- Communications
Employment period:
You should include the date at which the contract comes effective and the final date in the contract.
Compensation:
Payment terms should be specified in the job contract that either it is in hours worked or days. The deductions like the tax percentage should be included.
Salary/wages:
The employee pay should be stated in numbers or figures in the job contract.
Out-of-pocket expenses:
During undertaking employment responsibilities, sometimes an employee may incur personal expenses. The contract should provide clear information.
Ownership interest:
A contract should explain if an employee has ownership interest should be defined in the contract.
Other things to include are;
- Trial period
- Vacation time
- Personal leave
- Federal holidays
- Non-compete/future competition
- Employer’s role
- Appearance
- Disability
- Notices
- Governing law
- Signatures by employer and employee
Conclusion:
In conclusion, an employment contract template is an important document for employer during hiring a new employee. Your template should include all the necessary fields that should be filled and stated while engagement with an employee.
