Understanding Employment Contracts

Terms and conditions of employment can be specified in an employment contract. Knowing and understanding these stipulations are necessary for every business owner.

Terms of an employment contract

Written employment contracts can set out conditions or remuneration agreements not covered by a federal or state award.

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A written contract is not necessarily a requirement for an employment. An agreement made orally is legal as a common law contract. Nonetheless, it is highly encouraged and recommended to have in writing at least the following information:

• Job title and classification
• Pay rate and other allowances, if any
• Working hours and days
• Employment Status (e.g. part-time, full-time, casual, project-based)
• Probationary period (if applicable)

Business policies, procedures required to be followed and duties needed to do can also be stipulated in the contract.

The employer and employee should mutually understand, agree and act in accordance with the terms and conditions of the contract. The tasks to be done by the employee should not be illegal. In addition, the contract should be signed and dated by both parties.

Implied contract obligations

Implied or constitutional obligations are also included in employment contracts. The following are the employers’ obligations towards their employees:

• Pay correct compensation
• Ensure a safe workplace and mind after their health and safety
• Look out for their welfare and treat them with fairness, trust, and respect.

On the other hand, the following are the employees’ obligations towards their employers:

• Follow and do all reasonable tasks delegated by their employers
• Carry out their work with competence and care, not with negligence or laxity
• Work in the best interest of the employer, not to the detriment of the business

Your written employment contracts must conform to Australian laws and should be updated if there are any changes in tasks or responsibilities.

Important…

If you delay on setting out your written employment contracts because you think it is not essential or too time-consuming, how much would it probably cost you if there are no employment guidelines and contracts in place, and disagreements and litigation arise?

ACTION ITEM

Ask legal advice to make sure your employment contracts are precise, suitable, and comprehensible.

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James HuyVuong is a CPA and the owner of Your Accounting Partners. Partnering with businesses from start to scale thru to sale.