An employment contract or work contract is a kind of contract used in labor law to assign rights and obligations to an agreement between the parties. In other words, a working agreement is a binding document signed in a new job by an employer and an employee. The worker contract sets out the regulations, rights, and obligations for both the employer and the employee, and includes any special obligations undertaken which are distinctive in a specific hiring situation.
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Why is It Important to Draft a Work Contract?
A decent employment arrangement benefits both the employee as well as the employer. It states each party’s rights and responsibilities, defends the worker’s job security and protects the employer from certain hazards such as disclosing confidential company data after the end of the employment term.
Many work contracts provide for a definite period of employment. This ensures a job for employees as long as they do not infringe on the contract terms and allows employers to discredit a worker at the end of the period in jurisdictions that restrict employers’ ability to fire workers. The duration of this term must be negotiated with great care.
A decent work contract will stipulate precisely what offenses may result in the employee being terminated. This enables both candidates, as it guarantees that the worker understands which operations are needed and which are prohibited, making a serious breach less probable. The labor law of the specific jurisdiction must be consulted to make sure that the contract terms are not in contradiction with legal requirements.
If the worker has access to private information about the company, it is important from the employer’s point of view to include a clause that prevents the worker from disclosing this information to others. A worker may also try to prevent the worker from continuing to work for rivals, even though the labor laws of different jurisdictions differ as to whether such a clause is acceptable. In each of these cases, non-compete agreements are usually compulsory for the worker for a certain time (such as two or three years) following termination of employment.
The tasks of the employer and the employee must be spelled out clearly in the contract of employment. This segment should include work duties, salaries, and benefits for staff and any rewards for overtime. This should also include the right of the employer to move the employee to another position, although if this occurs, the employment contract should be changed to reflect the newly assigned tasks of the worker.
A proper employment contract will provide for dispute resolution processes that mitigate the time and cost of a fight in the courts that no party can afford. Appeals from arbitration proceedings are typically complex, though arbitration systems often reduce time and expense. Many jurisdictions require employment conflicts to be brought before a special tribunal for the settlement of employment disputes, in which case no dispute resolution provision is required.
Elements of a Work Contract
Length of Employment
The contract may indicate a start date and end date for the start of work. The agreement may also specify how many hours the employee shall work per day, week or month.
The contract may dictate the amount to be paid to the employee within a given time frame. The agreement can also specify the level of wage pay and what deductions the employer can make from the wage. The contract may also include a severance pay provision.
Fringe benefits refer to additional benefits intended to complement the salary of an employee. Such benefits include medical and other types of insurance such as dental insurance and health insurance, as well as pension benefits. Such incentives for employee illness, holiday, or personal use may include paid time off. Certain advantages include using a company car or account of expenses. Fringe benefits also provide the contribution of an employer to an employee’s diploma in education.
The agreement could determine when to facilitate a worker, or receive a bonus.
Resolution of Disputes
A work contract may contain a clause on how conflicts should be resolved under the agreement. Disputes can be settled in various ways. The parties opt for the method they prefer. The involved parties may use the contract for mediation disputes or binding arbitration. The parties can also make provision for a dispute to be brought before a court.
The contract may contain a clause known as a restrictive covenant. Under a restrictive covenant, the worker agrees not to compete with the employer upon termination. The worker agrees to not seek or solicit employment with the employer’s rivals in the marketplace. The restrictive clause of the covenant contains a geographic area where the operations of the worker are constrained. Those covenants have an end date.
A non-disparagement provision may be provided for in the employment agreement. An employee here agrees to not speak unfavorably about the employer. The worker gets a profit in return, such as the severance pay.
Advantages and Disadvantages of a Work Contract
A contract of employment sets out the terms and conditions of the employee-employer relationship. Like any other contract, this too has a few pros and cons:
- Monitor the willingness of the employee to leave the company.
- The contract will prevent the worker from trying to compete with the company.
- Will prohibit the worker from sharing secrets of the company.
- It provides the employer with better control of the worker.
- The employer and the employee shall be bound to the contract.
- Adjusting the contract terms means renegotiation. The worker must also agree to the adjustments and there is no assurance that he or she will.
- The agreement means that the employer should behave in good faith and always be impartial.