Important Clauses to include in your Employment Agreement

A well drafted employment agreement should contain a number of key clauses to protect the employer. It should also clearly outline the rights and responsibilities of both parties – ensuring there is no ambiguities. While the specific terms may vary depending on the type of the employment (e.g. part time, full-time or fixed-term) and the industry (e.g. legal, medical, retail, hospitality, etc.) the following are important clauses your employment agreement should entail:

  1. Job Title, Description and Status of Employment:

This is an obvious one, but employment agreements should always include the job title and a clear description of the position. Including a list of duties and responsibilities expected of an employee (and employer) will ensure transparency for all parties involved. An employee can be engaged on a full-time, part-time, casual or fixed-term basis.

To ensure that there are no disputes in respect of modern award rates of pay and/or applicable penalty and overtime rates, it is important for both parties to have a clear understanding of the status of employment (including the hours of work).

  1. Salary and Employee Benefits:

Employment agreements should also specify the salary (or hourly rate), the payment frequency, and any additional benefits such as bonuses, commissions, or stock options available to the employee. It is also important that employees are clearly explained their Superannuation options. This includes whether the employer is prepared to match any contribution made, and if so, how much they are comfortable contributing. Importantly, other benefits such as sick leave, paid holiday leave and/or work from home options should also be discussed and clearly defined in the employment agreement. This will ensure transparency between all parties involved.

In determining the salary and benefits for employees, it is important to consider any relevant modern award, as this will set minimum standards for pay rates and entitlements.

  1. Probationary Period:

A probationary period is a period of time at the start of a permanent full-time or part-time employment relationship that gives the employer the opportunity to assess whether their new employee is capable, reliable and suitable for the job. If there is a probationary period, it is important to outline its duration, and specify the conditions under which employment may be terminated during this period.

Six months is a standard timeframe for probation as employees are not eligible for unfair dismissal unless they have completed a minimum of six months employment with the employer (this is twelve months if the employer is a small business employer).

  1. Termination Clause:

The agreement should clearly define the conditions under which either party can terminate the employment relationship, including notice periods and any severance arrangements.

Without a termination clause specifying a notice period, an employee may be entitled to ‘reasonable’ notice (which is ambiguous).

  1. Confidentiality and Non-Disclosure:

It is important that the agreement outlines expectations regarding the protection of confidential information, intellectual property and trade secrets. Definitions for intellectual property and confidential information should always be included as it helps establish boundaries in relation to the ownership, use and protection of valuable business information.

  1. Non-Compete and Non-Solicitation:

Restraints of trade or “non-compete” clauses are key to protecting proprietary interests and preventing employees from engaging in activities with competitors post-termination of employment.

Therefore clauses restricting the employee from competing with the employer or soliciting clients/employees for a specified period post employment, and within a defined geographical area, can be critical to protecting the employer’s business.

Courts can strike down restraint clauses that are considered to be unreasonable. It is therefore important to have each restraint clause personally tailored for each employee, depending on their seniority and access to confidential information.

  1. Set off clause:

A contractual set off clause enables the employer to reduce or eliminate any liability resulting from modern award classification or monetary claims.

Where employees are provided with remuneration or benefits that exceed the employee’s minimum entitlements, including under any modern award or enterprise agreement, an employer can use the excess amounts to satisfy or “set off” any minimum entitlements that would otherwise be owed to the employee.

  1. Entire agreement clause:

An entire agreement clause prevents an employee from relying on statements or assurances provided to employees prior to entry into the employment contract.

It’s crucial for both parties to understand and agree to the terms outlined in the employment agreement. Consulting with legal professionals to tailor the agreement to specific circumstances can provide additional protection and clarity for all parties involved.

Moore Lawyers is available to provide assistance on employment agreements and should you need any legal advice on the matter, please contact our Gold Coast or Springwood office on (07) 3186 8669.

Posted in Employment Law