An employment agreement is a contract that governs the relationship between your business as an employer and your employee. An employment agreement explicitly states the obligations of you and your employee, such as the service that will be provided by your employee and the remuneration they will receive from your business. Read this Business Kitz blog to find out more about employment agreements.
Why is it important to have an employment agreement?
Enforceability in the event of a dispute
Employment agreements are essential for defining the relationship between you and your employee or contractor. Written employment agreements provide more certainty and are more enforceable than oral agreements in the event of a dispute. Written employment agreements explicitly set out what you and your employee must do to fulfil your obligations under the agreement. In the event of a dispute, the employment agreement can be used to determine whether an obligation was breached by either party.
Policies and procedures
Employment agreements will usually bind you and your employee to act in accordance with the policies and procedures of the business. These policies and procedures will set expectations for the behaviour and conduct of both you and your employee. Policies and procedures can be shaped to fulfil the needs of your business. For example, you may include provisions about employee conduct, dress codes, bullying and the use of social media. The employment agreement may state that a breach of the business’ policies and procedures may result in disciplinary action and/or termination.
Restraint of trade provisions
An employment agreement may also include ‘restraint of trade’ or ‘non-competition’ clauses to protect your business against your employee moving to a competing business. For example, if an employee who has intimate knowledge of your business development plan moves to a competing business, this may be a big problem for your business. If you have placed a restraint of trade clause in the employment agreement, the employee may be prohibited from working for or sharing information with a competing business for a period of time after their termination.
Compliance with the Fair Work Act 2009 (Cth)
An employment agreement can also help ensure that you are complying with your obligations as an employer under the Fair Work Act 2009 (Cth). Your obligations as an employer under the National Employment Standards (‘NES’) will be set out in an employment agreement.
What type of employment agreement is appropriate?
The type of employment will determine the appropriate agreement for your situation. Types of employment in Australia include:
- full-time employment;
- part-time employment;
- casual employment;
- contracting (and sub-contracting); and
You should choose an employment agreement based on how often and over what period of time the person will work for you. Another consideration is the tasks to be completed by the person. For example, if you have hired an employee who will work every Friday on a permanent basis, then a part-time employment agreement may be the most appropriate. If you are hiring the services of a self-employed tradesman, then an Independent Contractor Agreement or a Service Provider Agreement may be the most appropriate for that situation.
The appropriate employment agreement for your new employee will depend upon the industry that your business belongs to. The employment agreement should set out any industry standards such as safety standards and the industry award for the employed position.
You should seek legal advice before signing an employment agreement. If you require legal advice on entering into any type of employment agreement, please do not hesitate to contact our sister company, Legal Kitz by phone on 1300 988 954 or email to firstname.lastname@example.org.
The above information has been collected from relevant government websites and is subject to change. For the latest information regarding new or amended legislation, please refer to state and federal government websites.