Updated: Jul 8
Photo Courtesy: Joshua Coleman collected from Unsplash
1. What is an employment contract?
An employment contract is an agreement between the employer and an employee. It sets out the terms and conditions of the employment. In Australia, the employment contract can either written or verbal. If the employees do not have a written employment contract, they will still have rights. The common law contract of employment specifies terms and conditions where there is no written employment contract. The employment contract should follow the government rules.
The employment contract may be based on a workplace agreement between an employer and a group of employees or industry-based awards. Employment contracts should also be distinguished from agreements with independent contractors.
An employment contract must provide for at least the minimum terms and conditions and wages set by
the National Employment Standards (NES) contained in the Fair Work Act 2009 or
the relevant award, enterprise or other registered agreement.
Both the employer and employee must agree to any changes to the employment contract.
2. How many types of employment contracts are there?
The engagement of an employee depends on the nature and needs of a business. Each type of employee engagement category has its benefits and consequences. When you consider engaging employees for your business, you should look at the industry standard of each category of the employee. You also need to consider the impact of such engagement on your business finances. You should always prepare the employment contract in writing.
Following are the most common types of employment contracts:
Full-Time Employment Contracts-
A full-time employment contract ensures the employee that he/she will have ongoing employment. It also confirms that the employee is entitled to work 38 hours per week or an average of 38 hours a week. This condition may vary if the employee is covered by an industrial instrument. If you hired an employee under the full-time employment contracts, the employee is entitled to paid leaves. You also need to serve the employee with a notice of termination if you need to terminate the contract.
Part-Time Employment Contracts-
A part-time employment contract also ensures employees with ongoing employment. However, the employees with part-time employment contracts typically work less than 38 hours a week. They usually work regular hours each week and are entitled to the same minimum employment entitlements as full-time employees. Under the part-time employment contracts, however, entitlements are on a ‘pro rata’ basis.
Casual Employment Contracts-
Casual employment contracts are those under which employees work on a demand-only basis. Under such employment contracts, employees do not have any confirmation of ongoing employment like a permanent employee. They generally work on an ad hoc basis, which means that the work hours are irregular. Casual employees get paid for the hours they work. They are entitled to refuse shifts. However, casual employees cannot claim paid sick or annual leave. A casual employment contract can be terminated at any time without notice. As compensation for the lack of security, casual employment attracts an hourly loading.
Fixed-Term Employment Contracts
A fixed-term employment contract is used when an employee is hired for a specified time or to complete a specific task or project. The type of employment contract ends either when a project is complete or an event has passed for which the employment was created. Fixed-term employment contracts should clearly outline the length of the employment. The employees under a fixed-term employment contract receive the same entitlements as permanent employees. However, this type of contract does not require any notice of termination when the employment ends at the end of the fixed term.
Independent Contractor -
Independent contractors are self-employed workers who contract their services out to other companies. Contractors generally negotiate their remuneration and working arrangements with the employer. They also enjoy the freedom to work for multiple employers at the same time. As an employer, you should clearly define whether the person you are hiring is a permanent employee or independent contractor. There may be risks to your business if the contractor turns out to be an employee.
3. What shall be included in an employment contract?
An employment contract is a document that specifies rights, obligations on the part of both employer and employees and other employment conditions. Employees should be provided with a written employment contract in plain language that is easily understandable.
An employment contract may have three types of provisions in it.
Name and details of employer and employee;
Employment status (permanent, fixed-term, full-time, part-time, temporary, etc.);
Starting date or end date in case of fixed-term contracts;
Compensation terms (base salary, overtime rates);
Rosters or work shifts;
Meal or rest breaks;
Leave entitlements (casual, sick, paternity, maternity, family leave, etc.);
Flexible work arrangements if any;
Accommodation and travel arrangements;
Allowances or bonuses or profit-sharing;
Termination of the contract(at will or just cause).
Essential job functions;
Skill enhancement or training and development;
Covenants not to compete;
Nondisclosure of trade secrets or customer lists;
4. Can a contract provide for less than legal minimum wages?
An employment contract cannot provide for less than legal minimum wages. It has to be in line with the minimum standard set out in-
The National Employment Standards (NES)
Awards, enterprise agreements or other registered agreements that may apply to the particular employment agreement.
It does not matter if an employee has signed an agreement to receive less than legal minimum wages. Every employee is covered by NES. By making them sign an agreement in contrary, an employer cannot take away their right to receive minimum wages.
5. How can an employment contract be terminated?
An employment contract can be terminated by either the employee or the employer.
The correct procedure must be followed to ensure the process is fair for the termination of the employment contract. It should be carried out under workplace procedures. Depending on the circumstances, if an employee is dismissed or resigns, they may be entitled to be paid notice. If you are terminating the employment of your employee, you must ensure they receive their final payment. The final payout includes any entitlements owed to them, such as accrued but unused annual leave.
Please make sure you clearly outline the terms relating to termination of the employment in the employment contract and employee handbook.
If you need information about employment contracts or you need to find a lawyer to get legal advice on your employment contracts, please contact us at www.lawcircuit.com.au or call us at 0418631798 or email us at email@example.com
We will help you to find the best employment lawyer/legal services in Melbourne to solve your legal issues without having to spend a lot of time and money. We are here to make your legal journey easier.