Essential Elements of an Employment Contract
Employment contracts are fundamental legal documents that define the terms and conditions of the employer-employee relationship. These contracts play a crucial role in establishing clear expectations, rights, and responsibilities for both parties. It is essential for employers to understand the key elements that should be included in any employment contract.
Key Components to Incorporate in an Employment Contract Template
All contracts should commence with initial and fundamental details, including the complete names of the employer and employee, the employer’s address or the principle place of business in the State, the workplace location or, where there is no fixed or main place of work, a statement specifying that the employee is employed at various places or is free to determine his or her place of work or to work at various places. The contract must include the employment start date and the expected duration of the contract in the case of a temporary contract, or the end date if the contract is a fixed-term contract.
Job Title and Description
The job title, nature, grade or category of work and job description define the employee’s role, responsibilities, reporting structures and the scope of their work. A detailed job description outlines the tasks, expectations, and qualifications required for the position, providing clarity for both parties.
Probationary Period and Training
Employment contracts should include a probationary period, during which the employer and employee assess whether the fit is mutually beneficial. The contract should define the duration of the probationary period and any conditions related to it. The probationary period clause should outline the circumstances when the probationary period can be extended and the period of notice to be given by the employer and the employee during this period.
The employer should explicitly state the provision of any training which is required to perform the role. Any mandatory training required by law to carry out the role must be provided to the employee free of cost, count as working time and where possible take place during working hours.
Working Hours and Breaks
A contract of employment should outline the number of hours the employer reasonably expects the employee to work per normal working day and per normal working week and any terms and conditions in relation to hours of work including overtime. If the working pattern of the employee is completely (or mostly) unpredictable, the contract must acknowledge that the work schedule is variable, the number of guaranteed paid hours and the remuneration for work performed in addition to those guaranteed hours.
It should also include the reference hours and days within which the employee may be required to work, and the minimum notice to be given to the employee before the start of a work assignment. The contract of employment should clearly outline details of employee’s rest periods and breaks.
Remuneration and Benefits
This section specifies the employee’s compensation package. It should clearly outline the base salary or hourly rate of pay and the pay reference period, along with any additional forms of payment, such as bonuses, commissions, or incentives.
The contract should state the employer’s policy on the way tips or gratuities and mandatory charges are treated if relevant.
It is crucial to specify the frequency of payment (e.g., monthly, bi-weekly), the method of payment (e.g., direct deposit, check) and employee’s right to ask for a written statement of their average hourly rate.
This section should also outline the circumstances where the employer will make deductions from employees’ wages for example for any overpayment of wages, salary, remuneration or other payment made to the employee during the course of his/her employment with the Company.
Additionally, it is advisable that the contract details any employee benefits, including health insurance and other perks (e.g., stock options). Clear communication about compensation and benefits helps prevent misunderstandings and disputes.
Holidays and Paid Leave
The contract of employment should outline details of any paid leave and terms and conditions in relation to same to include annual leave, public holidays, force majeure leave, jury duty, compassionate leave, etc.
Absence, Sick Leave and Sick Pay
Any terms or conditions relating to incapacity for work due to sickness or injury should be included in the contract of employment together with details of company sick pay schemes (or refer the employee to a document containing the particulars of such a scheme). Where there is no company sick pay scheme a statement should be contained in the contract that the company will comply with legislation in relation to sick pay.
As an employer there is a legal requirement to provide your employees with access to a PRSA therefore this should be outlined in the contract of employment or alternatively if the employer operates a pension scheme, the contract can be used to refer the employee to certain other documents containing the terms and conditions of such a scheme.
The contract should contain a reference as to whether there are any collective agreements which apply to employment with the Company.
Company Retirement Age
To rely upon or implement a retirement age it must be outlined in the contract of employment. For a retirement age to be objectively justified, for example using one of the following reasons – succession planning, fairness and sometimes health and safety, case law has determined that the employee must not just be aware of a retirement age in practice, they must have been formally informed via their contract of employment.
Termination and Notice Period
The termination section outlines the conditions under which either the employer or the employee can terminate the employment contract. It should specify the required notice period for termination, allowing both parties to plan for a transition period. Additionally, the contract may outline the selection process to be used should a redundancy situation arise.
Lay Off and Short Time
It is advisable to have a lay-off or short time clause in the contract of employment to give the employer the right in law to place employees on lay off or short time should those circumstances arise.
Policies and Procedures
The contract of employment should refer the employee to where they can find details of company policies and procedures to include those required under the relevant Codes of Practice to include Disciplinary, Grievance, Dignity at Work, Right to Disconnect, GDPR, etc.
Confidentiality and Non-Disclosure
To protect the company’s sensitive information and trade secrets, employment contracts often include a confidentiality and non-disclosure clause. This section obligates the employee to maintain the confidentiality of proprietary data during and after their employment. It may also address the consequences of breaches of confidentiality.
Changes to a Contract of Employment
The written statement of terms and conditions can only be altered through mutual agreement between the employer and the employee, except in cases where the modification is necessitated by a legislative change. An employer is required to notify an employee of the nature and date of any change to the particulars contained in the contract of employment not later than the day on which the change takes effect.
Form of Statement to Be Provided
The contract of employment must be signed and dated by or on behalf of the employer, be in writing, and must be transmitted on paper or, provided that the information is accessible to employee, can be stored and printed and proof of transmission or receipt retained by the employer, in electronic form.
Employment Contract Template Conclusion
By incorporating these essential elements into the contract, employers and employees can ensure clarity, fairness, and legal compliance in their working arrangements. A well-structured employment contract serves as a valuable tool for avoiding misunderstandings, promoting a harmonious workplace, and protecting the rights and interests of both parties.
If you need assistance drafting employee contracts, handbooks or company policies and procedures, get in touch with us today.
This article was written by Mislav Magas, HR Consultant at Action HR Services
The information in this article is provided as part of the Action HR Services Blog. Specific queries should be directed to a member of the Action HR Services Team and it is recommended that professional advice is obtained before relying on information supplied anywhere within this article. This article is correct on 12th September 2023.