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  /  Contracts   /  Why contracts matter in HR
If you’re a small business owner, your employment processes may be rudimentary in terms of bringing someone on board. It makes sense. You’ve employed someone, you fill out the correct tax forms, go through what they need to know and you’re good to go. And let’s face it, it can be incredibly time consuming to flesh out an employment contract, not to mention the costs involved, particularly if you get someone else to do it for you.

This may not seem like a problem, and probably won’t be unless there is a disagreement about employment with the employee. So, while it may be seemingly tedious, without written documentation of your employment agreement setting out the basis of the terms and conditions of the employment relationship, you can expose your business to unnecessary risks. 

The upside to getting your employment contracts in place is that it is the first step to a strong HR and business structure. Working with an outsourced company to create templates that you can start from will mean that you ensure that you’re doing the right thing for your business and for your employees 

Contracts and Your Business 

Think about it this way, a written employment contract with all of the T’s crossed and the I’s dotted are designed to protect you as the employer. Without the agreement to guide the employment relationship, disputes can arise from both parties and can even end up in court. 

It’s also important to keep in mind that when you hire staff of a variation in employment status, either part-time, fixed-term or permanent, and in different roles, you’ll need to ensure that they all have the right contract and only base their contract on a template. It’s about customising the template to the employee and not the other way around. In other words, the one-size-fits-all approach will not work or stand up in court. 

Start Simple 

The Fair Work Act provides details for business owners in terms of their statutory obligations as an employer, but this doesn’t cover the role that the employee plays. However, they can provide a place to start in terms of understanding what you need to get in place: 

In simple terms, an employment contract should at least include the following basics: 

  • The Employers details 
  • Commencement date 
  • Agreed hours of work 
  • Location of work 
  • Probationary Period 
  • Who will the employee report to? 
  • Remuneration, including details of what is included in their remuneration (e.g. Any allowances or penalties that may be included as part of higher remuneration) 
  • Notice of termination from both parties 
  • Overtime (if included) 
  • Type of engagement – Full-time, part-time or casual? 
  • Contract for a fixed term or for the length of a project?

What your contract could include?

As outlined above, an employment contract should include all of the basic terms, which may sound obvious but some of these are often missed, leaving your business unprotected. But in addition to the basics, there are a range of other things that you can also include: 

Off set above entitlement payments 

Many employers, particularly small business, think that by simply paying above award minimum wages that the higher rate means they don’t have to pay other entitlements, such as overtime or penalty rates. However, without a well drafted off-set clause that buys out the relevant entitlements, employers can be exposed to underpayment claims. Employers also need to ensure that their higher rates actually ensure the employee is receiving more than they otherwise would have under their relevant Award or Enterprise Agreement for the same work.  

Duties and Responsibilities 

The contract should not only include an outline of the employee’s general, duties, responsibilities and obligations to the employer. This may include clauses requiring the employee to exercise due care and skill in performing their work, obligations about fitness for work and other similar matters. You may also want to explain how you plan to monitor their performance.  


Including confidentiality and intellectual property rights for the term of their employment and when they are no longer employed by you, ensures that your rights will be protected both during and after their employment. 

What your contract shouldn’t include 

This is an interesting one but a point that is worth clarifying… there are key points that your contracts should include but there are points that you should not include and some for obvious reasons: 

For example, you should never include anything that is contrary to law (or just because you think it would be a good idea!), this includes discriminatory, ambiguous, vague, contradictory or confusing. 

The contracts should not layout terms that are less than the minimum standards as set out in the National Employment Standards. Excluding these minimum entitlements through an employment contract, even by mutual agreement with the employee, will have no effect on the outcome if disputes arise and can expose an employer to civil penalties. 

You should also be mindful that anything you have included in the contract; you are legally bound by. Be mindful of the detail you include in relation to a bonus or commission payment for example. Ensure the clause future proofs the business for any unforeseen changes that may impact on the ability to meet the obligations under the contract.  

What to do now 

If you’ve read this article and have been nodding your head, or perhaps shaking it (!), you might realise that it’s time to get your employment contracts sorted.  

To start the process, there isn’t a magic “one-size” fits all solution, but the process of developing the contracts can be easier than you think. To give you the boost you need to get started we’ve put together a short question/answer session, to help you determine the best way to begin. 


Nicolas Adams | HR Consultant