Employment Contracts Worldwide

An employment contract is an agreement between an employer and employee and is the basis of further employment relationship. A contract of employment regulates the terms and conditions of employment between employer and employees.

What is an employment contract?

An employment contract is an agreement between an employer and employee and is the basis of further employment relationship. A contract of employment regulates the terms and conditions of employment between employer and employees.

  • An employment contract is generally considered to have been entered between employer and employee if:
  • An employment offer is made by the employer;
  • This offer is accepted by the prospective employee;
  • Each party has the capacity to enter into a contract e.g., the employee is of sound mind;
  • The contract does not contradict a legal requirement e.g., paying an employee less than minimum wage; and that
  • Both parties agree to the terms of agreement

What types of contract terms constitute a contract of employment?

A contract of employment is usually made of two types of contract terms which are "express" and implied terms". Contract terms can also be in the oral or written form.

  • Express terms are those that are specifically mentioned, either orally or in writing, and have been specifically agreed upon between you and your employer. On the other hand, implied terms are those that have not specifically been agreed upon between you and your employer but are too obvious to be recorded.
  • Express terms include terms like amount of wages, hours of work, overtime hours and overtime rates, paid holidays, redundancy pay and warning notice etc.
  • Implied terms include most general terms that are part of most employment contracts, terms implied by custom and practice and terms from the collective bargaining agreement. Similarly, these duties/obligations are implied into a contract of employment even if these are not provided in the agreement.

Both parties have to:

  • Maintain trust and cooperation with each other
  • Ensure health and safety at workplace
  • Act in good faith, where employee obeys reasonable instruction by his employer and the employer provides work and wages in time

Are express term stated in employment contract?

Not necessarily. These terms may not be stated in employment contract however these may be deduced from the following:

  • Job advertisement
  • Comment/promise made by employer during interview
  • Offer letter
  • Written statement of particulars
  • Any other document that you were asked to sign
  • Company policy manual/employee handbook

What are different types of employment contract?

The two basic types of employment contract are open-ended and fixed term contracts. Most of the employment contracts are open ended and employee is hired for an indefinite period of time. Employees are also hired for a definite time period under the fixed term contracts. These contracts mention a definite end date and the employment relation no longer exists after that date.

The other two types of employment contracts are individual employment contracts and collective bargaining contracts. An individual employment contract is signed between an employer and employee and both parties can agree to any conditions, however subject to certain restrictions like paying minimum wage, allowing workers to form unions, not hiring forced or child labor, etc.

Collective bargaining agreement is signed between an employer and a representative union at an enterprise or industrial sector. The agreement reached between employee representatives i.e. union officials and employer(s) is subject to a ratification vote by the employees.

What is included in an employment agreement?

A written employment agreement/contract specifies rights, obligations (at the part of employer and employees) and other employment conditions. Workers should be provided an employment contract in vernacular and plain language that is easily understandable.

An employment contract may have three types of provisions in it.

Basic Conditions:

  • Name and details of employer and employee
  • Workplace (address)
  • Job title
  • Employment status (permanent, fixed term, full-time, part-time, temporary, etc.)
  • Start date / end date (in case of fixed term contracts)
  • Probationary period

Employment Conditions

  • Compensation terms (base salary, overtime rates)
  • Hours of work
  • Rosters/work shifts
  • Meal/rest breaks
  • Leave entitlements (casual, sick, paternity, maternity, family leave, etc.)
  • Flexible work arrangements
  • Accommodation and travel arrangements
  • Allowances/bonuses/profit sharing
  • Contract termination (at will or just cause)

Other information

  • Essential job functions
  • Skill enhancement/training and development
  • Covenants not to compete
  • Arbitration clauses
  • Nondisclosure of trade secrets/customer lists
  • Notice requirements