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Employment Contract basics

An employment contract serves as the binding document between employer and employee. It sets out important terms of employment, and ensures that both parties understand what will be expected of them.

What should be included in an Employment Contract?

What should be included in your employment contract will depend on the nature of the employment. Although some companies will include the foregoing information in separate documents, here are some of the most common terms that your contract will likely include:

  • Wage information - The contract should include specific wage information including hourly rate or salary, commission information, etc. It will likely also include payroll schedule information.
  • Benefits - The agreement should discuss whether the employee will be eligible to receive benefits such as health insurance, dental insurance, vision insurance, life insurance, and disability insurance, and it should contain information regarding paid time off, vacation, etc.
  • Good faith clause - Sometimes called "best efforts," this clause requires that the employee works to their best ability. It may also include information regarding severance.
  • At-will and termination - An at-will clause explains whether the employer is required to have a reason for dismissing the employee. It also contains information regarding policies for termination, such as returning company property, etc.
  • Confidentiality and/or non-disclosure - The contract should specify which information is to be treated as confidential. It may cover information such as products, inventions, designs, processes, customer lists, pricing, trade secrets, and more. Typically, there is a mention of how long the confidentiality is expected.

What is contract employment?

A contract employee is typically a temporary type of employment classification. Contract employment usually refers to an individual retained by a company for a specific job at a specific wage for a specific amount of time—for example, a landscaping professional being hired for the summer season.

Should you have a contract of employment?

As a general matter, if you are giving or receiving money for any completed work, you should have a contract of employment. Rocket Lawyer's free Employment Contract is easy to use, and you can edit, save, and share it in your account. A contract of employment is a legally enforceable document.

Common scenarios under which you'll want a contract of employment include:

  • You are hiring a new employee and want to ensure that they understand the employment relationship.
  • You are hiring a new employee and you need them to sign a confidentiality agreement.
  • You need to communicate to your new employee that they are an "at-will" employee.
  • Thus far you've only had verbal employment agreements and need a formal agreement for your current employees.

What are the 4 types of employment?

There are a number of different types of hiring arrangements. Here are some examples:

Employees - An employee can either be a part-time or full-time relationship where a person is hired by a company. An employee can be paid by the hour or with a salary.

If you hire employees for the holidays or other peak times for your business, these might be classified as seasonal or temporary employees.

Independent Contractors - Independent contractors provide goods or services to a company under terms specified in a contract. Individual freelancers or businesses can be hired as independent contractors.

Interns or Apprentices - These individuals work under the direction of a master or highly skilled mentor who either teach skills necessary for licensing, or in the case of an intern, typically provide training for white collar careers.

If you have further questions about making an Employment Contract, ask a lawyer.

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Sample Employment Contract

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