5 Things You Need in Your Contract

When you first created your growing business, you probably had no idea how soon you would need to hire full-time staff. Start-ups, especially small ones, usually start with zero employees (except yourself), or maybe just a few temps during a busy season. But the day has come -- or perhaps you're anticipating that it's right around the corner -- and you now need an employment contract.

Before taking on extra help or a new employee, you'll want to understand precisely how to handle this new partnership professionally. While you might be used to paying independent contractors with a simple invoice, hiring part and full-time contracted workers requires a more reliable approach. An employment contract outlines the terms of their employment with you, along with any other work requirements.

Why Do You Need a Contract?

This is a valid question. Why create a contract when you trust the person you're hiring? Simply put, a contract protects you and your employee. It is a legally binding document that safeguards your business from any labor issues. A thorough contract will also tell your employee what you expect from them and give you a basis for their performance.

Here is why you need an employment contract.

• It includes your employee's job description, everything the job will entail, general goals, and responsibilities.
• It defines the terms of pay, as well as any benefits that come with the position.
• It lays down the potential terms of dismissal or the procedure for an employee to leave employment. In other words, what should happen if you fire them. This safeguards both parties and gives the employee a sense of job security.
• It outlines protocols for sick leave and vacation days for the employee and how to apply for them.

A contract for your employee is not required but can lead to significant problems down the road. So play it safe; draft a contract!

5 Parts of a Contract You Can't Forget

Employment contracts vary from business to business. You'll probably want to include more personalized information, but the main structure of a contract has these five important elements.

1. Information About The Job

First and foremost, you'll want to include the job description. A job description covers details about the role and the job title. Under this title, write which department the employee is part of and their immediate supervisor. You should also elaborate on the position's performance evaluation process and the duration between each evaluation.

2. Compensation and Benefits

This section should list clearly what the job pays and any other benefits available for the new employee. You'll also need to mention when they will have access to these benefits. Include the typical rate of a salary increase over time. If there are any 401k benefits, discuss the company's contribution.

3. Conflicts of Interest

This critical clause will safeguard your business in case the new employee decides to leave and start a similar business. The conflict of interest clause usually stipulates what the employee can and can't do as long as they remain employed with your company. It will usually go over rules that prevent the employee from taking part in any activities that could adversely affect your business. It should also state what measures you will take if the employee fails to comply with the rules.

4. Leave Policies

Paid time off can be a sensitive issue for any business, so make sure the employee knows exactly what you offer. The company's vacation policy should cover the number of paid days off your business allocates within a year. It should also discuss sick days, grievance, and maternity leave. You also need information about unpaid leave days and any overtime hours. Outline this information very clearly to avoid any contention later on in your working relationship.

5. A Confidentiality Clause

Your business is bound to work with some level of confidential information that an employee will have access to. This could be anything from personal HR data, to product plans your competitors would love to get their hands on. Protect this sensitive information and discuss the consequences of leaking or stealing it. Make sure that you have your new hire sign this clause as part of the contract. In case they breach this confidentiality agreement, you will have legal grounds to sue for compensation.

A Good Hire

While these five clauses do not cover a contract in its entirety, these are the absolute must-haves to any solid employment contract. And a solid contract means that you have covered yourself, your business, and protected your new employee.