Employment Contract

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A job is not only about knowing what you must do and how much you will get paid for it. There are job particulars that must be set. If you are presented with an employment contract, read and understand before signing on the dotted line. 

What is an employment contract? 

An employment contract refers to an agreement between an employer and an employee. The coverage of an employment contract pertains to the work arrangement, obligations, and terms of hire offered by the company to an individual employee. 

The exact details of an employment contract vary from one company to another. However, most employment contracts contain the following sections: 

Are there other names for the employment contract? 

Yes, an employment contract is also known as a “contract of employment” or “employment agreement”. All these terms are used interchangeably. 

Why is an employment contract important? 

An employment contract offers benefits for both the employer and employee. With an employment contract, there is no guessing game. An employee will not wonder what the exact job expectations are or if the employer will give a bonus. Similarly, the employer can also set job expectations, payment arrangements, and more. All obligations, duties, wages, benefits, and other terms are defined. 

Additionally, an employment contract can serve as a reference for concerns or clarifications. It protects the employer, employer, and the company. For example, if the employee will learn about sensitive business information, trade secrets, and technique, an employment contract can protect the company through confidentiality clauses. Lastly, having an employment contract in place offers a level of job security and stability since both the employer and employee know what to expect. 

What are the potential drawbacks of an employment contract? 

Since an employment contract is binding, it can take away the flexibility of both the employee and the employer. For example, if the employee discovers that they are not happy with the job and would like to pursue something else, they cannot just leave when they want. They must follow the employment contract and check the provisions on leaving the organization. If the employee then decides to leave without following the terms of the employment contract, this can be considered a breach of contract and may have legal ramifications.

For employers, they cannot just change the employment contract to adapt to business changes. Any change or amendment in an employment contract should be done via a renegotiation. 

Overall, the employer must weigh the advantages and disadvantages of having an employment contract in place. The decision to have one or not will greatly depend on the business needs as well as plans for scaling in the future. 

Are all employment contracts required to be written and signed? 

There are both advantages and disadvantages of having a written employment contract in place. While it is generally more standard that an employment contract is put into writing and signed, it is still possible to agree on a contract verbally. 

What are the different types of employment contracts? 

If you are a business owner, there are several contract arrangements that you can set when it comes to hiring and setting terms of employment of new employees. Consider what will work best for your business and employment situation. As an employer, you must also take note of and understand the implications of the different types of employment contracts. 

The following are the general types of employment contracts that you can use: 



Who uses an employment contract? 

Employment contracts are needed by both employers and employees. Human Resources professionals, especially those involved in recruitment, use employment contracts in hiring new employees and workers. They are also used for existing employees who are shifting to a different position, department, or if there are contract renegotiations. Employment contracts are especially crucial in managing senior roles where contracts are reviewed and negotiated by an employer-side attorney and an employee-side attorney. Employment contracts are also used for union-represented employees in both the public and private sectors. 

What are the topics that an employment contract should cover? 

When creating an employment contract, keep in mind that it should contain all the terms relevant to the employer-employee relationship. Determine the position and needs of the business. 

The following are sections that are included in an employment contract: 



Dispute Resolution

. In case of a need to resolve a dispute or any concern, this section will indicate ways by which the two parties can agree. It includes an explanation of the arbitration process and legal fees. 

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