What is an Employment Contract?

Sample employment contracts are useful for business owners since they provide a template to use when forming relationships with employees. Employment contracts are critical to any business, solidifying relationships between the employer and employees while ensuring that all parties are in agreement regarding schedules, hours, salaries, and any information that should be kept confidential.

Employment contracts are used to outline and identify all obligations, responsibilities, and rights of employees during the period in which they work for an employer. You might use an employment contract when hiring freelance workers, short-term workers, or high-level employees for the management team.

Sample employment contracts often include details about:

  • Vacation time/paid time off
  • Compensation (wages)
  • Any applicable probationary period
  • Confidentiality duties
  • A description of the job and its related duties
  • Termination procedures
  • Any additional information regarding the employee and/or employer

Employment contracts may also be referred to as job contracts, employee contracts, contracts of employment, or employee agreements.

Why Use an Employment Contract?

The hiring process typically includes completing an application, sending a resume, and interviewing with the hiring manager or HR person. Upon completing these tasks successfully, the final step might be asking the potential employee to sign a contract. You can hash out the details of what is contained in the contract prior to the employee signing it, including job duties, benefits, and salary.

Who Needs an Employment Contract?

Employers, managers, human resources professionals, recruitment officers, and managers can all benefit from using employment contracts as part of their hiring processes. An employment contract should be given to any new hire or potential recruit.

What are the Different Types of Employment?

An employee is someone who works for a company and performs a specific job with certain duties. In return, the employee receives monetary compensation. A full-time, permanent employee must meet all requirements for full-time employment, including the number of hours worked, and not have a specific end date for the job. A part-time, permanent employee does not meet all requirements for full-time hours, but they also cannot have a specific end date for the job.

Fixed-term or fixed-period employees do have a specific and pre-arranged end date for the job. In this example, an employment contract for a fixed-term employee would expire automatically on the date specified. No additional notice is needed from either the employer or the employee to end employment on that date.

What is a Probationary Period?

Many employers enforce probationary periods on new employees, often for about three months or longer. The period exists to ensure that the new employee fits well with the goals of the company, is capable of being a valued employee on a long-term basis, and exhibits the skills necessary to perform all job duties and tasks. 

Employers have the option to terminate a professional relationship with an employee when the probationary period is still in effect. By doing so, that employer typically does not need to show cause, offer severance, or provide notice to the employee. At the end of the probation period, if the employee is kept on, they would then qualify for any benefits extended to other employees in similar roles within the company. After the period has ended, an employer would be required to show just cause in terminating an employee, offer severance to the employee, and/or provide sufficient notice of termination. 

What are Non-Compete, Non-Solicitation, and Confidentiality Clauses?

An employment contract may include confidentiality, non-solicitation, and/or non-compete clauses. These clauses help to offer protection to the employer from situations that could result in lost business, trade secrets, and/or employees. If a contract includes a non-compete clause, this means that the employee who signed it is restricted from working for any direct competitors of the employer throughout the business relationship as well as for a specified period after the relationship has ended. 

Most non-compete clauses will extend beyond termination, but they must be enforceable, which means they have to satisfy certain legal requirements. For example, a non-compete clause will typically be limited to a certain geographic location. If a contract includes a non-solicitation clause, the employee who signed it is restricted from encouraging customers, clients, or other employees to switch to another service provider or company.

If you need help with sample employment contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.