Employment contracts are a great opportunity to make a first impression on a prospective employee. But they also tell the employee everything they need to know about their new role.
To do that, though, it needs to be comprehensive. But where do you start?
This Juro guide lists the most important aspects of an employment contract, and why they’re necessary. Let’s dive in.
What should an employment contract include?
1. Names and addresses of both parties
It sounds obvious, but one of the first things you should include in any HR contract is the details of the employee and the employer. This means capturing the details of each party’s name, as well as where they’re based.
Although this may seem unnecessary since both parties know who they’re contracting with, it’s important to still provide this context. After all, if a contract were breached, it’s important to know exactly who had which responsibilities.
It’s also important for contract tracking purposes since it helps HR teams to ensure they’re accessing the right contract.
2. Employee’s start date
When entering into a new employment contract, it’s also important to clarify when the role will begin.
In other words, you should include an employee start date and an effective date. This enables the employee to know when they can be expected to begin working.
You might have agreed an informal start date, but it’s still important to capture this information within the contract in case the relationship between the parties breaks down in the future, or to help resolve any issues if the employee is paid incorrectly, for example.
3. Scope of the employee’s responsibilities
It’s also necessary to detail exactly which responsibilities and obligations each party has within the employment contract. Specifically, an employment contract should include a brief outline of what the employee will be broadly responsible for in their new role.
This section of an employment contract should also include details such as who they will be reporting to within the role.
4. The term of the employment contract
An employment contract should also outline how long the relationship should last. If the employee is a permanent employee, their employment contract will be indefinite. However, if they are only being employed for a certain project or period, this will be a fixed-term contract.
Again, covering this is important since it manages an employee’s expectations. If an employee knows that they’re only being offered work for a fixed period of time, they’re less likely to enter into long-term financial commitments in their personal life, for example.
This section of the contract can also discuss the possibility of a contract extension if this is an option.
5. Hours of work
Just as employment contracts need to describe how long the contract lasts, they also need to explain how many hours the employee will be expected to work during this time.
Some contracts will be full-time and guarantee a minimum number of working hours. However, some may be zero-hour contracts, which means that both working hours and income aren’t guaranteed under the contract.
This is something businesses should be transparent about since it could be the difference between an individual either accepting or rejecting a role.
6. Probation period (if relevant)
It’s also important to include information about a probationary period within an employment contract - if there is one.
When including this, you should also explain which benefits and rights an employee is entitled to during their probationary period, and how these change once they’ve passed it. However, you must ensure that the employee’s statutory rights remain respected, even during their probation.
If you wish to extend an employee’s probationary period to further assess their performance, this should also be included in the employment contract.
7. Terms of payment
It goes without saying: if an employee is working for you, they expect to be paid. Your employment contracts should clearly outline what this payment will be, how it’s quantified and how it will be delivered, and how often.
There is usually also scope to negotiate the salary to ensure it meets each party’s expectations.
8. Rules on holiday entitlement and sickness absence
All employees are entitled to holiday pay and sick leave. An employment contract should include details of how much they’re entitled to and when they can use it.
This section of the contract should also include details of what happens to your holiday pay when you leave the job, and whether your holiday entitlement can be rolled over into the following year.
9. The notice period for employment termination
It’s probably the last thing on your mind when you’re extending an employment offer to an individual, but your contracts should also include information about what happens if that employee decides to leave the company.
Most importantly, an employment contract should outline how much notice an employee needs to provide the employer if they wish to terminate their contract. It should also outline how this notice should be provided. This is also called discharging a contract.
Similarly, an employment contract should include information about when the employer can dismiss an employee, and how they should do so. (An employment termination agreement template can help with this process).
10. The jurisdiction the contract is governed by
Like all contracts, employment contracts should briefly explain which jurisdiction the contract is governed under.
This is important since there may be terms that are implied by statute or under common law in certain countries. It also clarifies what country’s judicial system will be used to settle any disputes that may arise.
11. Variation clauses
If you intend to make a small change to the employee’s contract in the future, like a change to their working hours or work location, you may also want to include a ‘variation’ or ‘flexibility’ clause.
More substantial changes to the employment contract can be made using an employment contract amendment instead.
Automate employment contracts in Juro
With all of this in mind, drafting employment contracts from scratch can be painful for fast-growing businesses. It’s hard to ensure that all employment contracts, onboarding documents and offer letters are consistent when they’re being created manually and at scale.
Fortunately, Juro’s all-in-one contract automation software can reduce contract admin and make automating employment contracts simple. It does this in a few ways.
1. Automated employment contract templates
Juro enables legal and HR teams to establish automated contract templates, making it quick and easy for other team members to self-serve on contracts. With an automated contract template in place, users can auto-populate contracts using a simple Q&A workflow.
2. Integrations with popular HR systems
You can also use integrations with HR systems to mass-create, send and sign contracts. Juro users can generate thousands of employment contracts at once and have them agreed in seconds.
This eliminates the need for manual data entry. Plus, it often improves the accuracy of the information contained within a contract.
If you want to join the scaleup companies automating their employment contracts and reducing their time to hire, fill in the form below.