What is an Employment Agreement? And how does it help you as an employer?

Every employee needs a written and signed Individual Employment Agreement. It’s been a legal requirement for employers to do this since July 2011, and if you don’t comply you could face fines of up to $20,000.

Is there a benefit to Employment Agreements other than avoiding fines?

It’s actually in your favour, as an employer, to have Employment Agreements in place.

It’s not just so you don’t get fined – it can help you with employee negotiations if relationships turn sour.

There are clauses in the Agreement that are there to protect the business owner and the employee. The more detailed the Agreement, the better, in particular in the clauses that protect the business if the relationship falters.

 

What are the minimum requirements of an Individual Employment Agreement?

The minimum requirements of an Individual Employment Agreement are as follows:

  • Employer’s name.
  • Employee’s name.
  • Position.
  • Duties – as set out in the Position Description.
  • Place of work.
  • Working hours.
  • Types of pay and frequency of pay.
  • Public Holidays.
  • Rights in contracting out situations.
  • Restructuring due to transfer.
  • Negotiations with new employer.
  • No transfer or employment.
  • Resolving employment relationship problems.

You should treat this list as the absolute minimum, because one size does not fit all when it comes to Employment Agreements.

You would need different clauses for a factory worker versus a sales rep, or someone responsible for creating Intellectual Property for the business.

For that reason, you need to customise Employment Agreements for every role as much as possible. This protects you and your business, and gives you more legal rights.

 

Who needs an Employment Agreement?

Every employee needs an Employment Agreement, whether they’re full time, part time or fixed term. It’s also worth having an Agreement with contractors. Although a Contractor’s Agreement is very different to an Employment Agreement, it’s worth having to ensure every party knows where they stand.

 

How to implement the Employment Agreement

The Employment Agreement must be signed before the employee starts in their new role. It needs to be signed by both the employee and the employer. Ideally, this would happen before the new employee’s first day in the business.

This is sometimes difficult, particularly if there are any questions or negotiations. But if it’s planned in advance, it’s an opportunity to sit down and discuss and negotiate the Employment Agreement. That way everything is clear before the new employee starts work.

If you don’t have the Employment Agreement in place prior to the employee’s official start date, it will jeopardise the 90-day trial period. So if you were to end a relationship under the 90-day trial period, the trial period would not be valid, and you may end up with an undesirable employee. Read more about 90-day trial periods.

Remember to give the employee a signed copy of the Employment Agreement, as well as a Position Description. (The Position Description is also a legal requirement).

 

What if an employee’s role changes? 

If you are staying in the same relationship (i.e. employer and employee), you simply need to agree to the new changes and sign off from an effective date. You must create a letter negotiating the contract and have it signed and attach it to the Employment Agreement on the employee’s file.

If you are changing the structure completely, you need to end one Agreement to start another. In doing this, you must follow correct recruitment processes to ensure both parties are in agreement and have adequate time to seek independent legal advice and to consider the new proposal. If you do go down this route, be sure to have a very clear paper trail in place.

 

Summary

  • It’s a legal requirement for every employee to have an Employment Agreement (as well as a Position Description).
  • This applies to full-time employees, part-time employees, casual employees and fixed-term employees.
  • You could be fined up to $20,000 if you fail to meet this requirement.
  • A one-size-fits-all approach does not work: you need different clauses for different roles.
  • The employee and employer both need to sign the agreement – and before the employee’s first workday.
  • There are specific procedures to follow if an employee’s role changes.

 


Next step:

Do you need help with Employment Agreements?

If you’d like Employment Agreements that look after your business interests, we can help you.

You can choose to work with us in a number of ways, to suit your needs and your budget:

Not sure which option is best for you? Contact our friendly team today to discuss your needs.


An Employment Agreement isn’t just necessary by law – it protects your business interests.

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Tanya Gray highly driven individual, passionate about helping business owners understand and enjoy the recruitment process.

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