Skip to main content

Employment contracts should contain clauses that are fair and legally compliant. As a business, you should seek to include clauses in your employment contracts that are favourable to your business and provide protection.

In Australia, employment contracts must meet the minimum requirements set out in National Employment Standards (and any relevant Modern Awards). It’s also important for the benefit of your business to make sure you include a few fundamental clauses in your employment contracts.

In this article, you’ll hear from a workplace lawyer about what clauses should be included in employment contracts.

online law firm

Author: Farrah Motley, Legal Principal of Prosper Law and an employment contract lawyer.

An overview of topics covered in this article

This article will take you through some of the clauses that should always appear in an employment contract. You can skip ahead by clicking the links below.

  • Employment contracts and intellectual property clauses
  • Employment Contracts and set-off clauses
  • Employment contract and company policies
  • Employment contract and termination rights
  • Employment contract and probation period
  • Employment contracts and non-compete clauses
  • How can Prosper Law help?

Employment contracts and intellectual property clauses

It’s important to ensure that your business owns any intellectual property rights your employee might create or contribute to during the course of their employment.

Without an appropriate intellectual property clause, intellectual property may automatically be owned by your employee, not your business.

An intellectual property clause should be prepared by an employment law firm that understands copyright, trademark and other intellectual property laws.

employment contract clauses

Employment contracts and set-off clauses

If a Modern Award applies, it’s important to include a set-off clause in your employment contract. If drafted properly, a set-off clause will entitle your business to apply entitlements (other than superannuation) against the employee’s annualised salary. This set-off clause will only work to the extent the employee is paid over and above the Award rate and entitlements that are owing. 

If you don’t include a set-off clause in your employment contract, your business may be required to pay particular Award entitlements in addition to the annualised salary. If you underpay your employees or fail to properly pay their entitlements, you may be faced with fines or other penalties.

Employment contracts and company policies

If you have or are in the process of creating company policies, make sure the employment contract requires the employee to comply with the business’s policies.

However, be careful to ensure that those policies are not incorporated into the contract. Otherwise, you will need to engage a workplace lawyer to amend the employment contract each time you update your policies.

Employment contracts and termination rights

The employment contract should set out all the ways in which the employment relationship can be terminated, including for serious misconduct.

You should ensure the termination clause is as detailed and broad as possible. If something goes wrong during the employment, you want to make sure you can terminate the employment relationship and minimise the impact on your business.

Employment contracts and probation periods

An employment contract should address the probationary period. An employment probationary period is a period within which an employer can terminate an employment contract for any reason (except where there is discrimination).

Although a claim for unfair dismissal cannot be brought up until an employee has been employed for at least six months (think of it as a statutory probation period), they may still raise a general protections claim if they are terminated during the probationary period.

You want to make sure you have a broad right to terminate the employment contract, for any reason, during the first six months.

employment contract clauses

Employment contracts and non-compete clauses

A non-compete clause can be an important clause to include in an employment contract, particularly for employees in senior roles.

When employees have access to a business’s confidential information, trade secrets, customer lists and financial information, there may be a risk that they will use that information to:

  • start a competing business; and
  • poach their employer’s clients.

A non-compete clause needs to be carefully worded so that it is legally enforceable. A workplace lawyer can draft a non-compete clause in a way that is enforceable and protects the employer.

Having said all that; employment contracts don’t need to be lengthy, intimidating documents that no one looks at. It’s important to start the employment relationship off on the right foot and to do this you may want to consider framing the employment contract in a friendly ‘letter’ format.

The welcome letter can take front and centre, and those all-important, carefully worded terms and conditions can take their place as an attachment.

 How can Prosper Law help?

Prosper Law is Australia’s online law firm. We provide legal advice to businesses and individuals across Australia. Our areas of legal practice include contracts, eCommerce, publishing, legal counsel and employment law.

If you need to talk to an employment lawyer, get in touch today.

Contact the team at Prosper Law today to discuss how we can provide you with workplace legal advice for a fixed fee or at affordable hourly rates.

Enjoyed this article? Check out Are Electronic Signatures Legally Binding?

Farrah Motley | Legal Principal

PROSPER LAW – Australia’s Online Law Firm

M: 0422 721 121



A: Suite No. 99, Level 54, 111 Eagle Street, Brisbane, Queensland Australia 4000

online law firm


Leave a Reply