Key Terms to Include in a Permanent Employment Contract

In Short

• Clearly state whether the employee is full-time or part-time, as this affects their leave and other entitlements.
• Include details about salary, payment frequency, and any applicable award rates to avoid confusion or disputes.
• Add clauses to protect your business’ confidential information and ensure ownership of intellectual property created during the job.

Tips for Businesses

When creating permanent employment contracts, make sure they clearly explain the employee’s status, payment terms, and responsibilities around confidentiality and intellectual property. Clear contracts help avoid misunderstandings and protect your business.

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Table of Contents

• Permanent Employment
• What to Include in Your Permanent Employment Contract
• Key Takeaways
• Frequently Asked Questions

Of all the different types of employment relationships, permanent employment offers workers the most benefits and entitlements. As an employer, it is essential to understand what entitlements you owe to your permanent employees and secure these rights and obligations in an employment contract. This article discusses six key clauses you should consider including in a permanent employment contract. 

Permanent Employment

Unlike a casual employee, a permanent employee will generally:

• work set hours of work each week; and
• have an ongoing relationship with you as their employer. 

A permanent employee may either be classified as a:

• full-time employee who usually works 38 hours per week; or 
• part-time employee who works less than 38 hours per week. 

Permanent employees are also entitled to notice of termination and other entitlements, such as paid annual or personal leave. A part-time employee has the same entitlements to paid leave as a full-time employee but on a pro-rata basis. 

What to Include in Your Permanent Employment Contract

Your employment contracts must be well-drafted and clearly outline the expectations you have of your employees. 

An employment contract should, at a minimum, include clauses regarding:

• the type of employee;  
• payment terms;
• work, health and safety; 
• confidential information and intellectual property (IP); 
• probation and termination; 
• restraint; and
• workplace policies.

These requirements are elaborated on below. 

Type of Employee 

An employment contract should clearly state the type of employee you are hiring, specifically whether they are a full-time or part-time worker. You must provide specific terms in the contract depending on the type of employee you hire. 

Payment Terms 

It is vital that your employment contract outlines how much and on what frequency you will be paying your employee. The amount you choose to pay your employee will depend on a number of factors. It is important to note that all employees are entitled to at least the national minimum wage. However, any modern awards or enterprise agreements applicable to your employee may state a higher pay rate. In this case, you must pay your worker the rate stated in the relevant document. 

You reduce the risk of future disputes by outlining the amount and terms of an employee’s pay. 

Work Health and Safety

Your employment contract should require your employees to comply with your workplace policies and procedures, including those addressing health and safety. You should also ensure that any requirements you place on employees comply with work health and safety laws. 

Confidential Information and IP 

As a business owner, it is important to consider how to protect your business’ client base and confidential information if an employee leaves. Your employment contracts should include a robust confidential information clause, which requires employees to keep information, such as client lists, confidential during and after employment. Your employment contracts should also assign your business ownership of relevant IP.

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Probation and Notice of Termination 

You may also consider including a probation period in the employment contract for permanent employees. A probation period is a set period of time in which you may terminate your worker’s employment with a reduced amount of notice. This will give you an opportunity to assess an employee’s performance and consider whether you would like to continue to employ them.

It is important to note that you must give your employees a minimum notice period of one week, even if you dismiss them during their probation period. This will apply in all circumstances except if the employee has engaged in serious misconduct. 

Additionally, employees are entitled to minimum notice periods under the law, which increase incrementally based on their period of continuous service. You may either choose to include:

• the minimum notice periods; or 
• a set notice period of your choosing.  

If you insert a notice period, you must ensure it does not exceed the notice your employee is entitled to under the law.

Additionally, you should include the notice you require your employees to provide if they choose to leave your business. It is important to include this to avoid any possible dispute and allow enough time for a suitable handover. 

Restraint Clauses 

You may also consider whether you would like to include restraint of trade clauses in your employment contract. There are two different types of restraint of trade clauses: 

• non-competition clauses, which restrict an employee from working with a competitive business; and 
• non-solicitation clauses restrict an employee from soliciting or poaching any of your clients from your business. 

It is important to note that a restraint of trade clause can only be enforced as reasonably necessary to protect legitimate business interests. This will depend on your circumstances, including the:

• restraint clause itself;
• type of business; and 
• seniority of the employee. 

Workplace Policies

It is important to have policies that clearly set your expectations for your employees. However, you should not include these policies as a term in the employment contract to protect your business from a breach of contract claim. 

A breach of contract may arise if you incorporate your policies in the employment contract (i.e. if you include the policy in the employment contract or state that the policies form part of the employment contract), then fail to adhere to the terms of the policies.

Instead, you should ensure that the employment contract includes a clause that confirms that employees are required to comply with any policies and that these policies do not impose any contractual obligations on the business. 

You should also ensure that you do not provide your employees with workplace policies at the same time as their employment contract to limit the argument of the policies that form part of the contract.

Key Takeaways

If you are hiring a permanent full-time or part-time employee, you should ensure that you have a robust employment agreement to prevent future disputes. This should include clauses such as:

• the type of employee;  
• payment terms;
• work, health and safety; 
• confidential information and intellectual property (IP); 
• probation and termination; 
• restraint; and
• workplace policies.

If you need help reviewing or drafting a permanent 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. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions