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Important clauses in an Employment Contract Template

An employment contract is a crucial document that outlines the terms and conditions of the employment relationship between an employer and an employee. Having a good employment contract template is crucial. It should have important clauses to protect both parties and follow the law.

In this article, we will discuss the important clauses that should be included in an employment contract template. These clauses cover areas such as intellectual property, confidentiality, set-off, termination rights, probation periods, non-compete clauses, and more. By including these clauses in your employment contract template, you can establish clear expectations and protect your business interests.

Clauses that should be included in an employment contract

This article will take you through some of the clauses that should always appear in an employment contract.

An employment contract template should have important clauses to protect the employer and employee. These clauses cover various areas such as intellectual property, confidentiality, set-off, termination rights, probation periods, and non-compete clauses.

In this article, we will discuss each of these subtopics in detail and explain why they are crucial in an employment contract template. By including these clauses, employers can establish clear expectations and protect their business interests, while employees can ensure their rights and obligations are properly defined. Let’s dive into each of these subtopics and understand their significance in an employment contract template.

Employment contract template

Intellectual property clauses

Make sure your business owns any intellectual property rights your employee creates or contributes to while working.

Your employee, not your business, may automatically own intellectual property without an appropriate intellectual property clause.

An intellectual property clause should be prepared by an employment law firm. Knowing copyright, trademark, and other intellectual property laws is important for the document preparer.

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 clause only applies if the employee is paid more than the Award rate and any owed entitlements. 

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.

Company policies

If you have company policies, ensure the employment contract requires employees to follow them.

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 contract

Termination rights

The contract should explain how the job can end, even if someone does something really bad.

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. You will also want to minimise the impact on your business.

Employment contracts and probation periods

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

A claim for unfair dismissal cannot be brought until an employee has been employed for at least six months. Think of this as a statutory probation period. However, they may still raise a general protection claim if they are terminated during probation.

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

Employment contracts and non-compete clauses

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

Employees may have access to a business’s confidential information, trade secrets, customer lists and financial information. Because of this, there may be a risk that they will use that information to:

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

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, or intimidating documents. 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.

About the Author

Farrah Motley
Director of Prosper Law. Farrah founded Prosper online law firm in 2021. She wanted to create a better way of doing legal work and a better experience for customers of legal services.

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