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An employment contract is an agreement between you and each of your employees. Further, it sets out the rights and obligations of both parties. Employment contracts are essential as they are the backbone of your employee relations. However, it can be challenging to determine how you should structure your employment contracts and what is most appropriate for your business. Therefore, this article will take you through some critical considerations before preparing your employment contracts.

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Does an Award Cover the Employee?

The first step in determining what to include in an employment contract is determining whether an award covers the employee.

The Fair Work Commission (FWC) is Australia’s national workplace relations tribunal. The FWC has a range of functions relating to the termination of employment and other workplace matters. The Fair Work Commission hears cases about: 

  • unfair dismissal; 
  • transfer of business;
  • enterprise bargaining; and 
  • industrial action.

What Are Awards? 

One of the FWC’s key roles is to set awards. An award is an enforceable document that contains the minimum terms and conditions of employment of particular types of employees, in addition to any legislated minimum terms. Generally, an award applies to employees in a particular industry or occupation and is a benchmark for assessing enterprise agreements before approval.

You should contact the Fair Work Ombudsman (FWO) to determine whether an award covers a particular employee. The online tool ‘Award Finder‘ on the FWO website is very effective. Alternatively, you can contact the FWO directly if you remain unsure.

Does An Award Cover my Employees?

If you determine that an award covers a particular employee, you should note down the: 

  • details of the Award;
  • classification; and 
  • minimum salary payable under the Award. 

You will need these details when preparing an employment contract. Further, you must ensure that you pay an award employee no less than the minimum salary payable under the Award to avoid violating the Fair Work Act.

Where an award does not cover an employee, the National Employment Standards (NES) will still cover them. The NES provides 11 minimum standards for almost all employees related to maximum work hours, leave entitlements and more.

Are you Employing a Full-Time, Part-Time or Casual Employee?

When working out how you should draft your employment contract, the next question is to consider whether your employees work on a: 

  • full time; 
  • part-time; or 
  • casual basis. 

The rights of an employee hired under a full-time or part-time contract are generally more extensive than those of a casual employee. As casual employees are not entitled to paid leave and other benefits, they generally receive pay hourly.

How to Classify Employees

The first step to determining this is how many hours they will work per week. If they work an average of 38 hours per week, they will likely be a full-time employee. Full-time employees have entitlements under the NES, including annual and sick leave.

If your employees work less than 38 hours per week, you must determine if they are part-time or casual employees. A part-time employee is a permanent employee who works less than 38 hours per week. They will usually work regular hours each week and have ongoing employment. 

Casual Employees 

On the other hand, casual employees have no set hours and do not receive all entitlements under the NES, such as sick or annual leave. Therefore, you should be careful not to misclassify your permanent employees as casual employees. Where an employee meets the criteria of a permanent employee, they should receive the entitlements owed to permanent employees. Failure to provide such entitlements will result in serious consequences.

Key Takeaways

Working out which employment contract to use is a two-stage process. You must:

  • work out whether an award will cover your new employee; and
  • whether you wish to employ them on a full-time, part-time or casual basis.

Once you determine this, you will understand the employee’s entitlements and will be in a position to prepare your employment contracts. One great way to draft an employment contract is by using LegalVision’s easy-to-use template employment contracts, which you can prepare by completing a simple questionnaire.

If you need assistance preparing your employment contracts, 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

What is the importance of an employment contract?

Employment contracts regulate the relationship between you and your employees. Therefore, a well-drafted employment contract is critical for setting clear expectations for your employees and ensures that your commercial interests are protected.

How do I decide what employment contract to use?

Working out which employment contract to use is a two-stage process. First, you must work out whether an award will cover your new employee and whether you wish to employ them on a full-time, part-time or casual basis. Once determined, you will understand the employee’s entitlements and will be in a position to prepare your employment contracts.

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