Tips For Startups: What Your First Employment Contracts Should Include

Posted on: 28 January 2020

Contracts are often considered the backbone of the business world. They govern everything from your relationships with your business partners to your rights when dealing with suppliers and distributors. Eventually, they're likely to govern your relationship with your employees as well.

While you may have started your small business with only one or two people, your enterprise is growing. It's time to hire some key employees, and that means you need to have employment contracts in place. Here's what you should know.

Employment Contracts Are for Everyone's Protection

Employment contracts are important to both employers and employees. They spell out the employee's job duties, any expectations the company has toward behavior, and describe what happens if there's a dispute. Contracts ultimately protect both parties because they define rolls, establish boundaries, and create back-up plans. As long as a contract is fair, there's no reason to feel awkward about asking new employees to sign one.

Effective Contracts Need Specific Kinds of Information

You don't want your employment contracts to be so convoluted and detailed that it's impossible to wade through them or understand what they say. That would actually defeat their purpose! Instead, you should strive for a contract that's written in plain English and includes the following information.

  • A job description: Your new employee needs to have a clear understanding of the scope of their duties and the limitations. You should also clarify who your employee reports to and how their performance will be evaluated.
  • The compensation: Employment contracts should outline the employee's annual or hourly salary, the benefits that they will receive (such as medical, dental, or disability insurance), what perks they may have (a company car, performance bonuses, etc.) and so on.
  • The leave policy: Even if you're flexible about leave, you need to put policies in place regarding call-offs, making up work after hours or at home, and long-term leave.
  • Confidentiality agreements: If your business is like many others, your intellectual property is very important to your survival. Outlining your expectations for confidentiality regarding client data, formulas, plans, inventions, and more in your contract is essential. 
  • Termination agreements: Every employment contract needs to address what happens at the end of the employer-employee relationship. Each party's right to end the relationship, both how and when, needs to be outlined.

Ultimately, these are just starting points for a successful employment contract. The best contracts are usually very specific to each situation.

An Attorney's Guidance With a Contract Can Prove Invaluable 

One of the key things to remember about any contract is that both parties are held to the terms. You want to make sure that you aren't accidentally putting yourself at a disadvantage through the terms of the employment contracts you offer. A business transaction law services attorney may be able to help you avoid contract mistakes that could later turn out to be costly.