Employment Contracts: What You Should (and Shouldn't) Do

When your organization hires someone, you’re entering into a contract with them. This is true whether you have something written down or not; your agreement to pay somebody for their labour and their agreement to work for you still counts as a legal contract. Of course, things become a lot less clear without some kind of written agreement.

Depending on where you are based, an employment contract could be valid without anything in writing. For example, in the UK employers can go for two months without providing their workers with written contracts. However, there is no legal requirement for a written contract in the US, so in theory you could use a verbal or implied agreement regardless of how long somebody works for you.

However, implementing a written contract from day one is always preferable. It will clearly set out the responsibilities of both your organization and the new employee, and give you strong legal protection should anything go wrong. If you fire somebody for failing to conduct their duties, they might have grounds to sue for wrongful dismissal if you don’t have a written agreement of what those duties were.

So, what should go in an employment contract? There are some universal aspects you should aim to include; as well as some to avoid at all costs. Here is what you should and shouldn’t do when it comes to employment contracts:

You should: be clear about probation

One of the benefits of an employment contract is you can lay out the exact terms of a new employee’s probationary period, giving you a chance to try them out and, if necessary, let them go if they’re a poor fit for your organization.

However, it’s important to look at it from the employee’s point of view. Without clarity over the terms of their probation, a new worker can find the start of a new job stressful and may develop a poor relationship with your company.

If you can provide as much job security as possible with clear terms in your employment contract, you’ll have a much better chance of retaining top talent.

You shouldn’t: use probationary periods unnecessarily

Having a probationary period can be useful, but it can also be a hindrance. If you’re operating somewhere with at-will termination - such as the US - you’ll always have the ability to let an employee go as long as you’re not doing so for discriminatory reasons. In this case, a probationary period could send the wrong message.

Some HR professionals believe employees can start thinking that once their probation is over, they’re protected from termination. This can lead to a drop in performance. You might even find the way your probation terms are worded in the employment contract removes your organization’s right to terminate at will.

Instead, you should make sure your contract clearly outlines the circumstances under which you can terminate employees. If you can do so at-will, make sure that’s stated in the contract.

You should: protect against disclosure

When you hire somebody new, they’ll immediately be exposed to the way your organization works, your trade secrets, projects and more. That information could be valuable to your competitors, so you should try to protect it wherever possible. One way to do this is to include a non-disclosure agreement (NDA) in your contracts.

You shouldn’t: be unreasonable in your terms

When it comes to NDAs, you shouldn’t push your luck. Forbes senior contributor Heidi Lynne Kurter points out that many companies have restrictive NDAs that prevent employees from speaking out against abuse or discrimination, leading to workers feeling silenced and bad press for their employers.

In some countries, NDAs can’t prevent employees from whistleblowing or reporting illegal activity. However, even if you can legally prevent employees from speaking out, the more unreasonable the NDA is, the less likely it will hold up in court. In addition, NDAs that make your workplace feel less safe or trusting of employees will cause you to lose top talent.