“I don’t need a big contract of employment because my staff trust me and I pay above the industry – so no problems”.
In an ideal world, we’d all get along, know and trust what we were entitled to and never have a disagreement that we couldn’t just shake hands on. I like to personally ‘play with a straight bat’ approach to everything we do but unfortunately, the real world doesn’t always like to reciprocate such good faith; which is perhaps your own experience too?
Honesty remains THE best approach to engaging your staff don’t ever get me wrong. But here’s the ‘but’…a sound, protective and clearly written contract of employment will help all parties understand their obligations and conditions much better than having to go to the relevant industrial body or their employer when there’s a problem. FYI, many contracts do not have to be cumbersome documents designed to scare and intimidate employers and employees alike!
First the basics, if you have verbally done the following you have yourself a common law contract of employment:
- offered a person a job
- they have accepted this offer
- there is an intent to create a legal relationship
- there is consideration (this can be a period of time not just money btw)
However, having a formal written contract of employment is considered best practice for a business no matter their size, especially when engaging Award free employees who do not have an award to confirm some conditions of employment.
“Note that a contract can never provide for less than the prescribed minimum wages and conditions relevant to the workplace”.
Some key advantages (by no means all) of using a written contract include:
- A contract allows an employer to clearly state (or supplement) legislated minimum conditions that every employee is entitled to. This should extend to confirming what the ordinary hours of work are as this can have an impact on superannuation, especially if Award free.
- It correctly identifies the type and level of the role right at the start (this can help in the future where an employee believes they are undertaking a certain role and should be paid as such – it also goes a long way to establishing trust as there are no ‘secrets’ between the parties).
- It can clearly outline the additional obligations each party has under the employment relationship (although basic templates won’t necessarily have these of course). For example, what behaviours are expected that may result in disciplinary action, post-employment obligations and protections for the employer and some of the specific company obligations around leave entitlements just to mention a couple.
- Probation periods are dictated by a contract. A lot of businesses are surprised to find this one out that’s for sure…
- Being a legally binding document, a contract can also help answer queries around the intent of conditions in the workplace.
- Written contracts can allow for the annualisation of wages, overtime, allowances etc in certain circumstances. It is a condition under most awards that such arrangements must be in writing anyway. As a side note, annualisation and Individual Flexibility Agreements are not the same.
As a wise “old” manager once told me when an employee was asking after some specific entitlements… ‘what does the contract say?’
Some things to watch for when preparing your contract:
- being a legally binding document also means that changing any element will require mutual agreement. So think carefully about what you add into the contract before it becomes a problem in the future (for example, an incentive scheme that you might want to change in the future)
- generally, an employer cannot offer a flat rate (base + overtime + penalties + allowances etc) as a condition of employment. Often, implementing an Individual Flexibility Agreement after the employee has started is the only sure way to offset the flat rate against overtime etc. Get this wrong and you could find that you will be making back pay on missing overtime at the contractually agreed ‘flat rate’. If you just felt a chill reading this, awareness of a problem is always the first step to solving it.
Following are links to some free resources to get you started; but remember that the free contracts will rarely have all the protections and wording an employer may want to have in place.
Having said this, using the available free workplace templates is a great start and is something that should be in place even if nothing else, so look there first, honestly!
If you find they do not meet some of your expectations, especially after reading this article, you will need to either research the ‘inter-web’ for a day…or seek further advice (a much better option says the HR advisor writing this article).
Thanks for reading and click the subscribe button below to keep up to date on articles such as these, links to other resources and our own FREE tools and advice.