Guide to Construct Better Employment Contract

August 2, 201912:05 pm
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Global workforce is critical for the success of multinational businesses operating in a global economy. Businesses should also be au courant and comply with the relevant employment, regulatory, and remuneration requirements which apply to their workforce, as failure to do so can result in negative consequences across businesses. Therefore, ensuring the right employment contract is a pivotal first step in creating relevant employment.

What is an employment contract?

Employment contract, also known as working contract or contract of employment, is a kind of contract to attribute rights and responsibilities between parties to a bargain – in this regard, employer and employee. The contract should be legally written or if it is a verbal agreement, it should be binding in recorded material. The contract, most importantly, should be dictated clearly to avoid any misunderstandings.

See also: Energy consumption Affects Employment and Recession

How to create an employment contract?

The general guideline to writing a good employment contract is that you should include basic elements and use the right structure and highlight the right phrases to avoid misapprehension. Yet, an employment contract can also be adjusted depending on the nature of your organisation, including layouts and structures. You should also consult a lawyer if you want to include more complex clauses and law.

Here are the general guidelines of the working contract.

  • Names and addresses – Write it clear for both parties who are involved in the agreement.
  • Job title – Include additional information about the actual role. However, for small businesses that require their employees to move from duties to duties, you might want to include the element of flexibility.
  • Salary – Make sure to write whether the salary will be paid annually, monthly, or hourly. Also, you should include the amount as well as bonuses if any. Avoid ambiguity here. 
  • Location – Write the location of work. It does not have to be specific. You can refer to a local area rather than a specific village.
  • Hours of work – Think of the nature of work and your company. Does your company give flexibility to employees’ working hours? Or does the company provide fixed working hours?
  • Benefits – Write clearly what kind of benefits your employee will be getting, including statutory benefits and any enhancements to those benefits. Do list and provide detail on each benefit such as how many, requirements needed, and so on.
  • Disciplinary and grievance procedures – You don’t need to write full procedures here but you need to let your team members know where they can find the details and who to contact.

For further reading, you can refer to the 2019 report of Employment Law across Asia

Types of an employment contract and when to use it

The contract might vary from one person and another. It depends on the employees you want to offer the contract with and your company. According to Employment Law Contract, there are 7 types you should know.

  • Full-time permanent contract – If you think the talents are the best driver to business productivity, you might want to consider this. A full-time permanent employee can be a cornerstone of business because they can be a reliable partner and team.  Generally, a full-time contract will get better benefits and entitlements. Therefore, you should state better, clearly, and in detail regarding salary, working hours, holidays, position, and other aspects.
  • Part-time contract – This contract contains as much information as the previous contract. Yet, part-time employment will focus more on working hours and pay. Also, you should make sure that the terms and conditions of part-time employees are comparable to those of full-timers.
  • Director’s service agreement – This type of contracts should be comprehensively created. Normally, the documents will cite specific details such as how the director should behave and what the scope of director’s duty is. The rest will be like other contract’s arrangement.
  • Fixed-term employment contract – Fixed-term contract is normally for temporary employees. For example, you hire an individual for a period of time. It can be a couple of weeks or months. Creating a fixed-term contract should include at least a basic set of terms and conditions.
  • Zero-hours contracts – You can create zero trust contract when you need service from an individual without guaranteeing to provide permanent work to the employee. Freelance individual, for example, you provide a certain amount of work to him and you only call the freelancer when you need him. The contract generally contains hours of work, pay, regulation and agreement between both parties.
  • Consultancy agreement – It is normally used when an organisation wants to engage in the service of an individual who will not be employed. For example, you want to use the service of a recruiter but refuse to hire the recruiter. Therefore you should provide a consultancy agreement. The document will protect both parties, the company and recruiter, from complicated tax issues. It is also essentially needed to avoid susceptibility from HMRC or law that the recruiter is an “employee”.
  • Casual work contract – This contract is applicable for workers rather than employees such as factory workers, mining workers, etc. Commonly, a casual contract will include fewer employment rights such as it might not qualify to be paid statutory payments. 

Read also: Employment in the Age of Contracting and Temp Work