An employment contract is an agreement between an employer and an employee, agreeing on the established terms and conditions of the business for the worker. Employment agreements inform the employee of their rights and the actions the company take if they violate a rule of the company.
Anyone establishing a business should have a complete understanding of the employee agreement and its necessity. Businesses that fail to conjure up an employee agreement may face difficulty in the event they decide to let go off an employee or trouble brews in the office when several employees plot to leave at once with no employee agreement to stop them from doing so.
For this reason, it is vital for employers to consult with their attorney to draft an employment agreement for their future employees to sign before their come aboard.
The two main components of the employment agreement are:
However, employers can go a step further and broaden the employee agreement, addressing the following aspects of the employee-employer relationship:
The written employment agreement limits the company’s right to let go off the employer, establishing specific reasons when they can legally and rightfully fire them. Some companies do not use the conventional form of employee-employer agreements, but opt for the written at-will agreement.
Some employers require an employee to read and sign a written at-will agreement, detailing the employer’s right to fire an employee at will. The at-will agreement offers employee the option to quit the company at anytime they want, without having to serve a notice period. It also provides the employer the option to fire the employee when they want.
However, people may question the ethics behind this, asking the legalities behind it. They should know that the at-will agreement is very much legal. Employees applying for jobs should thoroughly read the employer agreement and likewise, the employer should make every clause and rule clear and easy to understand to avoid confusion and liabilities.
When employers terminate an employee or they leave for a better opportunity, the employer is the one that suffers from increased costs and obligations to meet deadlines. The employment agreement functions as a preventive measure, instructing the employer to remain with the company for a specific duration after they resign.
In doing so, it provides companies with extra time, which they can utilize to find another employee to replace the one leaving. To help employers understand why they require an employment agreement, here are some reasons:
Most employers base their employment agreement on practices integrated into their company overtime (pay, vacation time, position, incentives). With no written contract in sight, it leads to a host of trouble for the business, especially when the employee turns in their resignation letter. What if the employer decides to change the direction their company’s going by switching practices? If they do change practices, will it end the employee-employer relationship?
The employer will have to refer to the contract, if there is one, to see if the employee can sue them over this. You need to have your new employees sign the employee agreement and have your old employees sign it as well.
Employers test the waters with a new employee by making them serve a probationary period that can last anywhere from three months to six months. At this time, the employer evaluates the effectiveness of the newest hire on the team.
If the employer is not satisfied with the employee’s performance, they may terminate their contract without encountering any consequences in return. You need to add a brief paragraph in the employment agreement to inform employees about the length of the probationary period and your right to terminate if they are not the right fit for the company.
Employers need state clearly in the employment agreement about working overtime. For instance, the work hours set for your employees is from 9:20 AM to 5:30 PM and anything after those hours, counts as overtime.
Employers will have to compensate employees for working afterhours. This rule applies to employees who are paid on salary basis or hourly. Companies need to maintain records of the working hours of employees.
If all employees began working extra hours, the company will have to shell out a lot of money. To prevent employees from working after the clock, you can establish the payment equivalent to a specified number of hours. If they work past those hours, they will still receive the amount mentioned in the employment agreement.
Most employers have a policy handbook, informing employees of different policies such as privacy, conflict of interest, disciplinary consequences, and harassment. Policies such as these have harsh penalties associated with them. The company fails to enforce these policies, as they are not included in the employment agreement. You should add not all, but the most important policies in the agreement.
Terminating an employee is tricky, as it can backfire on an employer if they have not mentioned the payment of an employee upon termination. They should provide the employee with a notice, before firing them. Additionally, they should include the fixed amount an employee in their position will receive if the company fires them. The terms and conditions change with promotions and seniority so you need to draft a new employment agreement.
In short, an employment agreement for employees can save the employer time, money, and legal trouble that may rise in the event they employee leaves or you release them.