Your complete guide to employment contracts in Australia

What Australian employers and business owners need to know about when and how to use employment contracts.

First published on Thursday, Jun 04, 2020

Last updated on Tuesday, Jul 02, 2024

There is no legislative requirement for you to have employment contracts in Australia. But based on your industry, you may have specific requirements to put one in place.

We highly recommend you use contracts as a tool to enforce terms and conditions that can inform the employment relationship.

Although the employment agreement should ideally take the form of written contracts, verbal contracts are still acceptable. Although the latter does significantly increase the risk of misinterpretation by one party or the other and can create issues down the line when employment ends.

Let's start from scratch.

What are employment contracts?

Employment contracts are an agreement between you as an employer and your employees that sets out the terms and conditions of employment. Contracts, like we said before, can be written contracts or verbal contracts.

All contracts must provide for at least the same minimum terms, conditions, and wages set by the National Employment Standards (NES). These are outlined in the Fair Work Act 2009 or the relevant award, enterprise, or other registered agreement. You cannot contradict Fair Work obligations in your contracts even if an employee agrees to these amendments.

Any edits you make to the terms and conditions set within your contracts will need to be signed off by your employees.

What to include in employment contracts

Contracts are the most effective way to outline the terms and conditions of the employment relationship.

The purpose of a contract is to create the foundation of the employment relationship including employment status. This aspect of contracts is particularly important if the employee works for you on a part-time or casual basis. Setting out the conditions of employment in written contracts—including remuneration and obligations—helps to reduce the risk of misunderstanding or confusion.

Although every employment contract is different and needs to reflect the specific employment relationship between the employer and the employee, there are certain conditions of employment that should be included in contracts, regardless of your business size or industry.

You should include the following terms and conditions in your employment contracts:

  • The name and personal details of the employer and the employee.

  • The date employment commences and the probation period (if this is for permanent employee contracts).

  • The job title and description, which sets out the employee's role and duties.

  • Clause referring to your employer policies and procedures.

  • Clauses referring to the essential requirements of the role such as licenses, clearances, and registrations.

  • The type of employment is full-time, part-time, or casual.

  • The place of work and operational hours of your business.

  • The payment method (remuneration clause) in terms of a salary, wage, or piece rate; what is included in this payment or paid separately such as superannuation, loadings, overtime, bonuses, benefits, and allowances—however commissions are generally set out in a separate scheme.

  • Employee Leave entitlements—the NES provides compulsory minimum standards for various types of leave including annual leave, personal leave, and long service leave.

  • Clauses protecting employer property and information like a company vehicle or intellectual property.

  • Confidentiality agreement making it clear what business and employer information should be kept confidential, and what the possible consequences may be in the event of a breach.

  • Non-disparagement clause preventing employees from actions that can reflect negatively on the company.

  • The amount of notice that both the employer and employee must give before ending the employment relationship— the Fair Work Act includes minimum notice periods.

  • Termination conditions including redundancies.

  • Clauses regarding assignment, jurisdiction, severability, and variation of terms.

What provisions to include in employment contracts

On top of the terms and conditions set out above, you also need to consider provisions to deal with any potential changes in the employee’s role or the scope of their duties.

For example, will the same contracts still apply if employees need to change locations, roles, or duties?

Depending on the employee’s position, you may also need clauses in your contracts preventing them from setting up a similar business close to their former employer for a period and/or stealing your clients, though these clauses can be hard to enforce.

When are employment contracts helpful?

When it comes to your business and legislation, there are two scenarios when your employment contracts become very helpful to the protection of your business.

The first is when you need to discuss rights, duties, promises, and agreements.

So, it's important that your contracts clarify employment rights, duties, financial promises, and agreements.

The second is when disputes arise. In disputes, first consider whether the contract has an offer, acceptance, and consideration. If it's a legally binding agreement and you breach that contract, you are open to legal action.

The tools you need to nail your employment contracts

We've mentioned already how important it is to have written contracts with your employees.

But it's not always easy to fully understand and follow through on the laws involved in the process. The majority of businesses that find themselves on the wrong side of the law are often unaware of their own missteps.

With new laws constantly being enforced that you must account for in your paperwork, no business can assume that they are doing the right thing.

We help you slash your HR admin hours in half with a library of expertly written HR document templates including contracts and employee handbooks.

Plus, all your HR documents can be backed up on our unlimited, secure, cloud-based document storage system. Giving you the benefit of never needing to worry about losing a document or missing a step in your onboarding process.

Jenny Marsden

Associate Director of Service

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