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Essential Elements of an Employment Contract

Essential Elements of an Employment Contract

Essential Elements of an Employment Contract

As your small business begins to grow you may start considering hiring additional employees. When undertaking this process, it is important that you not only protect your business but also your employees. A good way to do this is through an employment contract. An employment contract is a legal document that outlines the terms and conditions for both, the employer and employee. Here are some essential elements that should be included in all employment contracts.


Terms of employment
The terms make up one of the most important elements. You want to specify whether it is a full-time, part-time, or temporary position. You may also want to indicate the length of the employment with a specific end date if the position is temporary. It is also important to indicate if you are going to implement a probationary period. Details such as the length of this probationary period should be included.

Compensation and benefits

Compensation details should include the annual salary amount or hourly wage. Additional information regarding potential incentives or raises should be specified. The ability to earn commission should also be noted, including how it will be calculated.

The benefits plan should be laid out so that the employee understands what exactly is included. You should also provide information about the employer/employee split, in terms of what % each side will pay.

Job description

It is important to provide an employee with a clear outline of the job requirements. This should include job title, responsibilities, and the schedule that the employee is expected to work. You could also include any performance goals that you would like to employee to achieve and how these will be measured. This will ensure that there is a mutual understanding between you and the employee with the ultimate goal of creating a professional and efficient relationship.

Employment absence

Make sure to clearly explain the time off policy. This will include sick days, family emergencies, and/or unpaid leave. You should also detail how many paid vacation days are available per pay period and whether this amount increases with tenure. It is important to outline the process for each scenario so that there is no confusion when such events arise.

Non-disclosure/confidentiality agreement

You should make note of any information that is accessible to your employees. This can include business trade secrets and client lists. This agreement should indicate what exactly is to be kept confidential and for how long.

Termination and severance

It is important to be aware of notice requirements for termination in the Employment Standards Act. This section should include the different scenarios for terminating an employee contract and the notice that is required. It is also beneficial to include a severance plan based on each ground of termination. This will help prevent any confusion and arguments when the relationship does come to an end.

You may also wish to include provisions for after termination. This can restrict an employee from starting their own business in the same industry for a specific time period. This will provide protection for your business. On the other hand, the employee may want a provision included that would prevent you, the employer from limiting their future job opportunities.

This list describes some of the essential elements that should be included in all employment contracts. However, there are various other elements that also need to be considered based on your specific situation and business. If you are thinking about hiring your first employee, you should reach out to a small business lawyer to discuss which elements need to be included in your employment contract. A well written contract can go a long way in protecting your business and ensuring a healthy business relationship.

If you have any questions regarding an employment contract or other small business concerns you can leave a comment below or book a consultation with me.

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