12 things you must include in your employment contracts
Time to hire a fresh face for your company? Or maybe you are ready to sign a shiny new employment contract?
The question then is how you go about it without consulting an army of lawyers. We have prepared 12 points here that you must consider including in your employment contracts. And as an employee-to-be, these are points to watch out for in a negotiation situation.
Do not sign anything before consulting this. Then, when ready, use our ready-made templates and digital signature to make it easy as pie to handle.
1. Job information: title and responsibilities
Any good employment contract contains some basic information. And we are not just talking names and addresses here. Make it clear what the position is about. Consider including:
- What is the scope of the position? What responsibilities does it entail?
- What sort of tasks are expected to be completed by the employee?
- Who does the employee report to? Who is their closest boss?
- Is the employee in a team structure?
- Are there extra responsibilities? Will the employee manage a budget?
2. Benefits and compensation [Salary, bonuses, equity]
Regardless of the level of work-life balance, the coffee available or the amount of Friday beers - in the end, one of the most important factors is compensation. Consider these points:
- How often will the employee be paid? Biweekly, monthly?
- Will it be based on time registering and hourly pay, or is it a monthly salary?
- And what is that salary?
- Is the employee entitled to any equity or shares in the company?
- Is there a bonus structure? How big is it and what is the path to achieve it?
- Signing-on bonuses are not just for footballers. Does this position have one?
- Other perks? Health care, dental coverage, gym memberships, catered lunch?
Extra: Benefits can also be things that are not monetary. Is the employee allowed to work during their commute, are there work-from-home days or other goodies?
3. Paths to promotion / Career possibilities
Career progression is extremely important to most hires. Especially Millennials expect a set career ladder or opportunities to grow important skills. Consider the following:
- Is there a budget or allowance for courses to improve skills?
- What is the stance on employees undertaking extra education?
- How are performances evaluated? By whom?
- What is the path to promotion for the employee?
Extra: Consider describing this in an employee handbook that is an appendix to the contract itself.
4. Time off, sick days and vacation
This is where being a Danish-based company shows its beautiful face. Five weeks of vacation a year, a lot of sick time and often flexible systems for taking time off. But not all are that fortunate. You should consider:
- How is time off accrued? How much and how often?
- What is the level of acceptable sick days? What happens if an employee goes over it?
- How many vacation days are there each year?
Extra: This is a section of the contract often very regulated by law. Make sure you follow the laws of your country or state.
5. Schedule and employment period
Most people like stability. Knowing when you should arrive, leave and when to expect extra work is positive. Include the following:
- When are the office hours?
- Can it be a remote position?
- How many hours per week is the expected workload?
- Is this fixed or flexible?
- Is the position part-time, full-time or an internship?
- Is the employment term fixed, permanent or at-will?
- Do employees work during holidays or weekends? What about evening or night work?
Extra: This is often also regulated by law. In Denmark, for example, the average working week by law is 37 hours if the position is affected by collective bargaining.
6. Confidentiality agreements / non-disclosure agreements
Some companies really guard their secrets of business. But if you do not have it in writing, it might be hard to enforce in the end. Include the following points:
- Is the employee under a non-disclosure agreement or confidentiality agreement?
- What are they allowed to share outside of work?
- Who owns the intellectual property the employee creates?
Extra: Some industries have special circumstances here. Think of the confidentiality of working with patented technology or medicine or the confidentiality between a psychiatrist and their patient.
7. Technology policy
No companies function without a full suite of electronics. It is ripe for distractions. But also ripe for abuse. Consider writing the following down:
- How is technology handled on and off work? Is it permissible for an employee to browse social media during working hours?
- Is it expected that the employee is a company ambassador even on their private social media?
- Can employees bring home laptops, smartphones and screens?
- What about technology for remote work positions?
- Does the employee receive any gear or should they bring their own
Extra: In many countries, the level of private use of company electronics can have a direct effect on taxation - keep that in mind!
8. Sexual harassment policy
It is 2020 and sexual harassment policies have never been more important. Consider the following in employment contracts or as a reference:
- Is there a sexual harassment policy? Consider setting out directly what is allowed and disallowed behaviour.
- How are complaints handled? Is it completely anonymous?
- Who should they report to?
- How are the claims arbitrated?
- Will there be harassment training?
- Access to psychological help in case of any harassment?
Extra: This can be a part of an employee handbook. Also note that sexual harassment is not just company policy but in many places also a criminal offense.
9. Expense policies
A traveling salesman might be expected to hold some business expenses that will be reimbursed. Maybe the employee is moving cross-country to sit in one of your chairs. Think about the following:
- Is there a relocation reimbursement?
- Is it expected to have private expenses or reimbursements for the company?
- How are these handled? What is the procedure?
Extra: This point will not be relevant to all positions or companies - so feel free to skip it if it is not important to you.
10. Discrimination policies
In the same vein as with sexual harassment, employees expect that their place of work takes discrimination seriously. Include the following in contracts:
- What is the discrimination policy?
- Is there any sensitivity training?
- Who do you report to and how is it handled?
Extra: Consult applicable law to ensure you are compliant with minimum conditions here.
All good things come to an end. Maybe it was a bad fit, maybe one of the parties is at fault. Either way, set in stone how the termination procedures are handled.
- What is the expected notice for termination?
- Is there a trial period? Does the notice change after a period of time?
- Under what circumstances can an employee be terminated?
- Are employees entitled to severance packages?
Extra: While nobody wants to consider this at the beginning of a professional relationship, it is extremely important. Notices, valid terminations and termination periods is often heavily regulated by law.
12. After the job
As you part ways and the employee goes their own way, what sort of situations should still be covered?
- Non-compete: Can the employee work in the same industry immediately?
- Non-solicitation: What happens if the employee tries to pry away the company’s clients?
- Non-disclosure: How are trade secrets handled?
Extra: Depending on your state, country, region or industry, many of these might not be enforceable.
What to do before signing
Remember that contracts are often final. As an employer or employee, do not expect to make big changes three months down the road. So, if you want something done, get it in writing.
This is also where using Contractbook comes in handy: collaborate on contracts through comments and make sure all negotiation is logged and kept on file.
Here are three quick checks before you sign as an employer or employee.
- Read the entire document through and make sure you understand every little bit.
- Consult our list here and make sure everything you want or need is in writing
- Check with your lawyer, union or any other people who can help you check everything.
Disclaimer - the ifs and buts.
Now, making this list is hard. We have tried to write something that can be used in the US, in France or in India. But we are a company founded in Denmark. That means that for every position, there are applicable EU laws, Danish laws and collective agreements between unions and employer’s associations.
This is multiplied in complexity with all the countries that could benefit from this list. An American company might have to consider state’s laws and federal laws. If in doubt, always consult a legal expert in your country or state.
Because, ultimately, you can write anything you want in an employment contract. You could write the employee should bake you a fresh apple pie every single day. But that does not make it legal or enforceable. Instead, many of the points covered here are also just points that can ensure a smooth onboarding and employment.
Because an employment contract is not just laws and stipulations - it is also a negotiation of benefits and duties.