Essentials of an employment contract: What should it contain?

What is an employment contract?

An employment contract is a document that establishes the employment relationship between an employer and an employee. Its conclusion is a key step as it confirms the agreement on the working conditions, job description and rights of both parties. In most cases, the employment contract is concluded in writing, which is essential for proving the terms of the employment relationship at a later date.

Simply put, an employment contract serves as a “guide” to your employment relationship – it sets out what tasks you are to perform as an employee, how much you will be paid for the tasks you perform, and what benefits or responsibilities your position entails. In addition, it protects your employer and you as an employee from misunderstandings and legal disputes.

What are the basic elements of an employment contract?

Every employment contract should include key points that ensure its validity and clarity for both parties. These are defined by law and without them, the contract may not be considered legally binding. Your employment contract should therefore also include:

Identification details of both parties

The basic identification details of the employer, such as name, address and identification number. For the employee, the name, surname, date of birth, permanent address or other identifying information. This ensures that both parties are clearly identifiable.

Job position and job description

This item contains the exact job title, for example ‘accountant’, ‘technical officer’ or ‘project manager’. In addition to the job title, it is advisable to include a brief job description so that both the employee and the employer are clear about what the job entails. For example, the job description may state ‘keeping company accounts’, ‘responsible for technical drawings’, or ‘managing projects from the design phase to implementation’. This detailed description will avoid misunderstandings about the expected job description.

Start date

This item indicates the date on which you officially start work as an employee. The date of commencement is important not only for determining the duration of the employment relationship, but also because this date determines other rights and obligations of the employee, such as holiday entitlement or entitlement to wages for the relevant period. The typical start date is the first day of the month, but it can be any date you and your employer decide.

Place of work

Your contract of employment should contain precise information about where you will do your work as an employee. This location can either be a specific address (e.g. the company’s headquarters) or a general description if the employee works in more than one location (e.g. working on different construction sites). This point is key for employees who travel or have the ability to work from home. Employees in the IT or marketing sector, for example, can do their work remotely – home office is growing in popularity. That’s why it’s important to define in the contract whether they are allowed this “place of work”.

Duration of the employment relationship

The employment contract should make it clear whether the employment is for a fixed or indefinite period. A fixed-term contract should specify exactly when the employment relationship will end and the conditions under which the contract may be extended. In the case of an open-ended contract, the duration is open until the employment relationship is terminated.

Wages, remuneration, leave

The contract should clearly specify what the employee’s salary is, the frequency of payment and whether there are any other forms of remuneration. For example, it may state that wages are paid monthly on a specific date and include certain bonuses. This will also often specify whether rewards are dependent on meeting performance targets or achieving performance quotas.

The contract may also specify holidays, especially if they exceed 4 weeks in a calendar year or if the company mandates what is known as company-wide holidays.

What is the purpose of an addendum to an employment contract?

During the course of an employment relationship, there may be times when certain terms and conditions need to be adjusted – for example, an increase in pay or a change in position. In these cases, it is ideal to conclude an addendum to the employment contract. An addendum to an employment contract contains precise wording about the changes agreed by both parties. At the same time, like the original contract, it must again be signed by both parties.

If the employee was originally employed as an “administrative worker”, but over time has started to perform more specialised tasks, the employer may decide to change the job title to “office manager”. In such a case, there is usually an adjustment in job duties, but also in pay and sometimes in working hours. These changes just need to be formally included in an addendum to the employment contract.

Simple employment contract – model

If you want to prepare a simple employment contract in a hurry, you can use the following template. Even with this simpler form of contract, it is important to include all the basic elements to make the contract valid and legally binding. However, we more than recommend that you at least have a lawyer check the contract afterwards to avoid complications.

A typical sample of a simple employment contract includes:

• Identification details of both parties (employee and employer).
• The job title and a brief description of the work activity.
• Date of employment and place of work.
• Salary and form of remuneration.
• Duration of the employment relationship (fixed/indeterminate).

Thus, a simple employment contract for the position of “temporary worker in a café” could include basic information such as the identification of the employer and the temporary worker, the starting date, the hourly wage and the specification of the place of work. This type of contract is suitable for seasonal work or casual employment where it is not necessary to include complex terms and conditions and addendums.

Common mistakes in employment contracts: have you made them too?

Employers often make mistakes when drafting employment contracts that can lead to misunderstandings and legal complications. The most common mistakes include:

• Unclear job descriptions – Unclear job descriptions can lead to employees having different ideas about their duties. Therefore, always provide a detailed description of the job duties to avoid subsequent guesswork.
• Omitting an addendum – If there is a change in the terms of the employment contract, such as a pay increase, it is important to enter into an addendum to the employment contract. This will prevent any future disputes.
• Incorrectly specifying the duration of the employment contract – For fixed-term contracts, it is crucial to specify the exact end date of the contract and the conditions for renewal.
• Unspecified pay – The employment contract should clearly specify the amount of pay to avoid confusion. The employee should be clear about how much money they will receive for their work, when they will receive their pay and whether there are any additional benefits attached to their remuneration such as meal vouchers, 13th pay and so on.

Conclusion

The contract is the basic document of the employment relationship and should be drafted carefully and in detail. Properly drafted terms of the employment contract will provide legal certainty for both the employer and the employee and minimise the risk of potential conflicts. Contact our firm to ensure that your employment contracts are free of hidden hooks while offering no room for guesswork.