The backbone of all employer-employee relations is an employment agreement. An employment agreement or employment contract is a legal agreement between you and your workers. The agreement should state the terms and conditions of your relationship with your employees, covering important terms such as pay and other employee entitlements. When drafting an employment agreement, you must honour your employee’s entitlements under different laws and industrial instruments. With this in mind, this article outlines five key terms you should include in an employment agreement.
1. Pay Terms
It may seem like an obvious term to include in your employment agreement. However, setting out your employee’s pay in an employment agreement is important. In Australia, you must pay your employees for their work. That is to say; you cannot substitute monetary pay for other benefits such as food.
Your employee’s rate of pay will depend on a range of factors. Namely, a modern award or enterprise agreement that covers your employee will largely determine how much you should pay them. Since a modern award covers most employees, you should clarify their pay rates in the relevant award.
However, as a starting point for determining your employee’s pay, you should consider the national minimum wage. Under the Fair Work Act, the national minimum wage applies to most employees not covered by an award or registered agreement. As of 1 July 2022, the national minimum wage is $21.38 per hour.
If you are unsure what payment terms to include in your employment agreement, it would be wise to seek legal advice. By seeking legal advice, you can avoid underpaying your employees.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
2. General Standards: Hours, Leave, Termination
When drafting an employment agreement, you should also include the hours you want your employees to work, the leave your employees are entitled to (if any) and the reasons for and conditions surrounding termination.
You must also give every new employee a copy of the Fair Work Information Statement before or soon after they begin employment. You must also give casual employees a copy of the Casual Employment Information Statement.
Similar to pay rates, general standards largely depend on the relevant industrial instrument that covers your employees. These industrial instruments can only include or build upon the entitlements outlined in the National Employment Standards.
So that you are aware of the minimum entitlements, a summary has been outlined in the tables below for hours and leave. You should note that the NES set out minimum entitlements meaning you can offer the standard or additional entitlements but cannot offer anything less. In terms of terminating employment or making a position redundant, you must give your employee notice of termination.
Hours
|
Entitlement |
Explanation |
|
Maximum Weekly Hours |
You cannot make your full-time employee work more than 38 hours a week unless these additional hours are reasonable. Your employee can refuse to work additional hours if they are unreasonable. |
|
Requests for a Flexible Work Arrangement | Full-time and part-time employees are entitled to request a flexible working arrangement if they have worked in your business for at least 12 months. Flexible work arrangements can include job-sharing arrangements or work from home. |
|
Casual Conversion |
You must offer your casual staff the option to convert to a full-time or permanent part-time role if they:
|
Leave
|
Parental Leave |
Employees who have or will have responsibility for the care of a child are entitled to parental leave if they have worked for your business for at least 12 months. |
|
Annual Leave |
Your full-time and part-time employees are entitled to four weeks of annual leave based on their ordinary work hours. |
|
Personal/ Carer’s Leave |
Your full-time and part-time employees are entitled to 10 days of paid personal/carer’s leave when they are ill or injured. They can also use this leave if an immediate family member or household member is sick or injured. Your full-time or part-time employees can take two days of paid compassionate leave if:
Additionally, all employees are entitled to five days of unpaid family and domestic violence leave each year. |
|
Community Service Leave |
Your employees are entitled to take community service leave while engaged in voluntary emergency management with the SES or jury duty. |
|
Long Service Leave |
Your employee’s eligibility for long service leave depends on the laws in your state or territory. In NSW, an employee who has worked in your business for 10 years is entitled to two months of paid leave. |
|
Public Holidays |
Your employees are allowed to take a day off on public holidays. |
3. Restraint of Trade Clause
When recruiting employees, it is essential to ensure that they do not perform work or share trade secrets, intellectual property (IP) or information about your business with your competitors. It is also in your best interests to ensure that employees do not leave your business only to start working for a competitor.
A restraint of trade clause or non-compete clause might be useful to avoid your workers taking their expertise to a competitor. A non-compete prevents your employees from becoming a competitor or joining a competitor during their employment and even after their employment with you.
Generally, a non-compete clause will operate within a restraint area and for a restraint period. For example, an accountant may not be able to provide bookkeeping services in competition with your workplace within the same suburb as your workplace. Additionally, your employee may not be able to work for your former clients for a period of up to twelve months after they leave your business.
You should note that you should draft restraint of trade clauses as cascading clauses. This means that restraint areas and periods will successively reduce over time. Employers tend to use cascading clauses since if a restraint on trade is unreasonable, the entire clause is not void.
4. Confidentiality Clause
Similar to a restraint on trade clause, a confidentiality clause is necessary to protect commercially sensitive information within your business.
A confidentiality clause can prevent your employee from using or disclosing confidential information. If your employee leaks said information, you might be able to pursue legal action for breach of contract.
A confidentiality clause should outline the:
- scope of the agreement, including what information is and is not confidential;
- duration of the non-disclosure period; and
- consequences of contravening the clause.
5. Intellectual Property Clause
You should also have a section in your employment agreement that sets out how your intellectual property (IP) is dealt with and who it belongs to. As a general rule, the employer will own the intellectual property created by its employees during their employment. As such, it is essential to have a clear definition of IP in your employment agreement and an IP assignment clause.
Key Takeaways
Every employment agreement is different. Therefore, your employment agreements must reflect the:
- interests of your business;
- type of business you have; and
- employees you recruit.
To ensure your interests are best communicated and protected through an employment agreement, it is advisable to include terms regarding pay, general standards, restraint of trade, confidentiality and resolving disputes.
If you need help drafting your employment agreement, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
The National Employment Standards, or the NES, outline eleven minimum entitlements for all adult workers covered by the workplace relations system. Modern awards, enterprise agreements and employment contracts cannot provide less than what is in the NES.
A non-compete clause can prevent your employees from working for a competitor either during or for a period of time after you employ them.
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