Employment Contract: What Is an Employment Contract? Types of Employee Contracts

Before starting a new job, your employer might ask you to sign an employment contract. The legal document will highlight the rights and duties of both parties. Scroll through this article to learn more about employment contracts, their types, why you need to sign them, and other details. 

What Is an Employment Contract?

An employment contract refers to a signed agreement between an employee and an organization. The legal document helps employees understand what will be expected of them at the workplace. Moreover, the contract will make both the employer and employee aware of their legal rights.   

What Specifics Does a Contract for Employment Typically Include?

After learning “what is an employment contract,” you should figure out the specific components included under it:

• Schedule: An employment contract will include how many days and hours an employee is expected to provide their services.
• Salary or wages: Employment contracts also mention the agreed-upon wage, salary, or commission. 
• General responsibilities: An employment contract will include details about the general duties and responsibilities of the employee.
• Employment duration: Employment contracts will need to incorporate the specific duration an employee has agreed to work for the organization. While it is an ongoing period for some cases, it can be a specific duration for others. In other cases, a minimum duration is specified, with a chance of extension. 
• Communications: In case the role is about handling the website, social media, or email of an organization, the contract might specify that the ownership of all communications belongs to the company.
• Confidentiality: Usually, employers make employees sign non-disclosure agreements to protect confidential company information. But, some employment contracts also include clauses about confidentiality. 
• Future competition: At times, an employment contract can also include a noncompete clause. According to an NCC, an employee cannot take up a job that will put them in direct competition with the company after leaving it. While there can be a separate NCC, this clause often finds a mention in employment contracts. 

Some other employment terms mentioned in a contract can include ownership agreements, information about mitigating work-related disputes, and terms about where an employee can work after leaving the company. 

Types of Employment Contracts

You will come across different types of employment contracts according to the job role and the organization. Some common types of employment contracts are as follows:

Written Employment Contracts

Written employment contracts can offer clarity about the duties and benefits of the employee to prevent confusion. Before signing a written employment contract, you will have to go through the terms carefully. Don’t sign it until you aren’t comfortable with the terms. Remember that you will have to face legal implications for breaking the contract terms. 

Implied Employment Contracts

The terms of an implied employment contract can be inferred from statements during a job promotion or interview. Some examples of where implied contract terms can be derived from are as follows:

• Statements, actions, and past employment history of the organization
• A recorded history of annual reviews, promotions, and raises
• During the interview, the candidate might have been promised that they wouldn’t be fired without a good reason. 

Even though implied contracts are not written, they are binding. 

Union Labor Agreements

Labor union members are protected with group employment contracts containing specific benefits, wages, scheduling issues, and other working conditions. Union contracts help outline processes to solve the grievances of workers. 

Who Needs an Employment Contract?

Employers can use employment contracts in the case of all new recruits and current employees changing jobs. An employment contract will help provide details about the expectations of the employee. The document will also provide legal protection to the employee and the employer. But some instances where an employee contract is particularly significant are as follows:

• Union-represented employees for the public as well as the private sector
• Senior positions where employment contracts are checked by attorneys representing the employer and employee

Does an Employment Contract Need to Be in Writing?

Usually, an employment contract needs to be in writing. A written contract makes the hiring process more structured. Additionally, written contracts offer a sense of security to employees. But written employment contracts also have some disadvantages, like limited flexibility. 

Why Is an Employment Contract Important?

An employment contract is important for the following reasons:

• It clarifies the duties and responsibilities of an employee. 
• It provides details about the rights of the employer as well as the employee.
• It increases the job security of the employee.
• It protects company information like trade secrets and special techniques. 

When Should You Ask for an Employment Contract?

Now that you know everything about “what is an employment contract,” you should know when to ask for it. Several organizations require employees to sign an employment contract before they join. The presence of an employment contract usually indicates that there are some unusual circumstances like the following:

• The employee is difficult to substitute because of their skills and experience
• The employee has access to confidential information
• The employer doesn’t want the employee to work for a competitor

Wrapping up

Employment contracts serve several benefits for both employers and employees. But remember to properly review the terms of employment before signing it.