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5 elements to include in an effective employment contract

| Nov 10, 2020 | Firm News |

Your employees are important assets for your business, and you want to make new hires welcome.

It is in your best interests and theirs to ensure they know what to expect when joining your company and an employment contract is a good starting point. Here are five basic elements to include.

Position details

Define the position the new employee will fill. Include the name of the position and outline the duties. Also include the location of the job and the hours of employment.

Performance expectations

Spell out any skill upgrades you wish to see as the new employee becomes more familiar with the job. Include production goals. If the new hire is in sales, define sales volume expectations.


Explain the base wage and method of payment, whether salaried, commission or hourly. Include your overtime policy. For a salesperson, explain how commission payments work and how the company manages draws against commissions. Describe the procedure for handling expense accounts.

Company benefits

The contract should provide information about company benefits, such as the health insurance plan. Cover profit sharing, stock options and retirement plans. Include company policies regarding vacations, holidays and sick time.

Term of employment

It is important to include the term of employment and the potential for extending or reducing the contract term. You must also include termination information whether the company terminates an employee with or without cause.

Avoid misunderstandings

Remember that plain, concise language should prevail throughout the contract to avoid any misinterpretation. Employers often use professional assistance both in writing and reviewing employment contracts to ensure there are no legal missteps.