An effective employment contract is beneficial for both parties involved—the employer and the employee. If one party does not benefit, the contract is not going to be effective, and needs to be reevaluated and rewritten. The purpose of the contract is to declare the basic rights and responsibilities of both parties. Additionally, it safeguards the employee’s job security and the benefits he or she is supposed to receive. Regarding the employer, the purpose of the contract is to safeguard him and the company against any possible risks. Some of those risks could be that the employee violates the contract by neglecting work responsibilities or shares confidential information. This article will address six basic key elements that need to be included in an employment contract.
Basic Elements Included in an Employment Contract
When evaluating an employment contract, make certain that these six key elements are included and meet with the satisfaction of you and the employer.
Element One: Parties Involved
The first element to document is the names of the parties involved. The employer and his or her company are listed along with the specific employee named. It is important for both parties to be clearly named so that there is no confusion during the work project duration or if any conflicts arise. Additionally, if there are any complications, the employee needs to know who the responsible party is to discuss issues with.
Element Two: Services Provided & Benefits Received
Every element implemented into the contract is important. However, this element is especially vital, because the specific services that will be provided by the employee and the benefits that will be received need to be declared. Specific declaration of the services and benefits eliminates any possible miscommunication during the duration of the project. When evaluating the contract, make sure that you pay specific attention to the services listed that you will provide. If you see any deviations from what was originally proposed, call that to the attention of the project manager or your boss. Additionally, closely review the benefits listed to ensure that you will be receiving everything that had been promised to you for your services. Benefits can consist of anything from payment for work, commissions, annual salary, bonuses, health benefits, and any other benefits for employment.
Element Three: Process for Service Implementation
This third element involves the basic process for how the services will be implemented. For example, the services to be provided must be properly detailed, as well as the manner and timeline in which you will be completing them. If you have agreed to be in an exclusive professional working relationship, that needs to be detailed in the contract. This is the section of the contract where your hours, whether full-time or part-time, are detailed. Additionally, be sure to review the contract for conflict of interest terms. You must completely understand the legality that has been set forth in the contract before you sign it.
Element Four: Terms for Ending the Contract
Similarly to how you set forth terms for starting the work project, it is important to also have it clearly delineated how the contract will end. All factors must be listed and clearly understood by both parties. There are three legal ways that a contract ends—with just cause, without cause, or by resignation.
- The first way pertains to an employer ending the contract due to a breach caused by the employee. Some types of just cause are illegal actions, professional misconduct, unethical behavior and disseminating trade secrets.
- The second reason means that the contract ends and the fault may not be yours. Simply put, the name says it all, “without cause”. For example, an employer may need to downsize the company and lay off personnel.
- The third reason is where the employee resigns and is the one who ends the professional working relationship with the employer.
Element Five: End of Relationship Benefits
At the end of the contract, there may or may not be final benefits distributed. It all depends upon how the contract ended.
- For example, if the contract ends “with cause”, the employer is not liable to pay the employee any balance of funds for payment due. The majority of time with such circumstances, the professional relationship is terminated immediately.
- When the contract is ended “without cause”, there may be certain entitlements that the employee will receive. However, this is based upon the legalities in each state.
- For an employee who resigns and ends the contract before it is legally terminated, he or she forfeits any final payments due to initiating the earlier termination. In the majority of cases with a resignation, the employee is usually required to give at least two weeks’ notice.
When evaluating the contract, it is important to carefully review all of the entitlement and minimum notice requirement terms so that there are no misunderstandings should a conflict arise and the contract need to be terminated.
Element Six: End-of-Relationship Duties
Finally, it is vital that you review the end-of-relationship duties so that you are clear on all of the terms stated in the employment contract.
- For example, if the contract ends, you may still be liable to the employer to keep all trade secrets; especially if a non-compete clause was signed. Basically speaking, this could impact your employment at another company. If the clause was signed, you may not be able to work for a competitor for a specifically set period of time.
- Additionally, if you signed a non-solicitation clause, you will be required to steer clear of speaking to any of the employer’s clientele for a specifically set period of time.
Evaluating an employment contract is extremely important due to all of the variables involved in the process. When you are contemplating signing the employment contract, your mind is most likely going to be focused on the new project and your excitement to begin work. However, taking the time to properly evaluate the contract will save you and your employer major headaches down the road by completely understanding the terms and avoiding any miscommunication.
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