An Employment Contract is an agreement between an employer and an employee that describes the terms and conditions of a job. It outlines the rights and responsibilities of both parties. 

Generally, an Employment Contract includes terms such as compensation, vacation time, work duties, and other essential aspects. Ultimately, it forms the foundation of a working relationship.

An Employment Contract can also be known as a:

• Hiring contract
• Work contract
• Job contract

Anyone who manages employees, such as employers, managers, small business owners, and human resource professionals, should create an Employee Contract when hiring a new employee. The agreement helps both parties understand their roles and responsibilities. 

Employees without an Employment Contract can request one from their employer anytime.

Employees vs. independent contractors

Employers and managers must be aware that independent contractors and employees are different. While the workers can sometimes do similar work, they have different roles, rights, and obligations.

Key indicators of an independent contractor include:

• Operating their own business as a sole trader or company
• Managing their own tax responsibilities
• Having control over how, when, and where they work
• Being able to negotiate their own fees and working arrangements
• Often working for multiple clients simultaneously

Independent contract workers should not use an Employment Contract. Instead, they can create an Independent Contractor Contract to outline terms and conditions between the contractor and the client.

While a written Employment Contract isn't strictly mandated by law in Australia, it's invaluable for ensuring clarity and preventing future disputes. Instead of relying on an informal, verbal agreement, a written contract provides crucial understanding for you and your employees.

A well-drafted and legally sound Employment Contract helps by:

• Establishing crystal-clear expectations and responsibilities for everyone involved
• Significantly reducing the likelihood of disagreements and misunderstandings later on
• Providing legal protection for both the employer and the employee

According to the National Employment Standards (NES), employees are entitled to the legal minimums. An Employment Contract can't offer conditions below these minimums.

Some businesses have enterprise agreements. These function similarly to Employment Contracts but encompass a larger group of employees, such as one or multiple businesses or enterprises. Employees might also be covered by modern awards, which outline entitlements for entire industries.

If an employee is covered by an enterprise agreement or modern award, they can still have an Employment Contract to specify additional terms. However, these terms can’t limit what the worker is entitled to from their other contracts. 

There are multiple types of employees, all with different entitlements. As a result, their Employment Contract will contain different terms.

Full-time permanent

Full-time permanent employees work an average of 38 hours per week on an ongoing basis, often with set hours. Their employment doesn't have a defined end date, and employers must provide notice or pay in lieu of notice for termination.  

Full-time employees are entitled to paid leave, including annual, personal, parental, and compassionate leave. They must also get 10 days of family and domestic leave each year.

Part-time permanent

Employees hired on a part-time, permanent basis work fewer than 38 hours. They often get a set amount of regular hours every week. Like full-time permanent workers, their contracts do not have a set end date, and employers must give notice or payment to end their employment.

Part-time employees are entitled to paid leave, such as annual and personal leave. They also get 10 days of paid family and domestic violence leave.

Fixed term 

Fixed-term employees are temporary hires whose contracts are limited by time. They can be full-time or part-time. 

Often used for seasonal work or project-based roles, Australian law generally limits fixed-term contracts to a maximum of two years and restricts offering subsequent fixed-term contracts for the same role.

Casual employment

Casual employees often work sporadic and irregular hours, with no firm commitment from the employer about future work. The work is usually as needed, with employers offering hours and employees accepting shifts. 

Casual employees are often entitled to higher pay rates than non-casual workers. They should also receive 10 days of paid family and domestic violence leave. 

When you create your Employment Contract with LawDepot's template, our questionnaire will guide you through all the steps and prompt you to fill in the relevant information.

Your Employment Contract should include details about the following:

1. Employment type: Full-time permanent, part-time, fixed term, or casual
2. Employment duration: For fixed-term contracts, if applicable
3. Work location: Where the employee will primarily be based
4. Employer details: Legal name and contact information of the employer
5. Employee details: Full name and contact information of the employee
6. Job title and description: A clear outline of the employee's role and responsibilities
7. Probationary period: Length and terms of the initial probationary period, if applicable
8. Compensation details: Wage or salary, payment frequency, and any applicable bonuses or allowances
9. Work hours: Regular hours of work, including start and finish times and break arrangements
10. Leave entitlements: Details about annual leave, personal/carer's leave, and other relevant leave
11. Superannuation: Information about the employee's superannuation fund and contributions
12. Restrictive covenants: Clauses like confidentiality, non-solicitation, or non-competition, if applicable
13. Termination requirements: Notice periods and procedures for ending employment.

Some information won't be in the Employment Contract, but it is still vital. Australian employees must be provided with information about their entitlements.

After their employment begins, new workers should be given a Fair Work Information Statement (FWIS). The FWIS includes, but is not limited to, information on the National Employment Standards (NES), right to request flexible working arrangements, and the role of the Fair Work Ombudsman and the Fair Work Commission. 

Fixed-term employees should receive a copy of the Fixed Term Contract Information Statement (FTCIS), while casual employees receive a copy of the Casual Employment Information Statement (CEIS).

The Fair Work Act 2009 outlines requirements for employers and establishes national employment standards. Employers should be familiar with its contents and the rights and responsibilities of the employee, employer, and organisation.

Australia’s Fair Work Ombudsman offers guidance to employees and employers. Furthermore, employers can visit Business Australia for additional information on fulfiling their legal obligations.

Restrictive covenants, also known as restraint of trade clauses, are specific terms within an Employment Contract that aim to protect the employer's business interests by limiting the employee's actions during and after employment. 

To be legally enforceable in Australia, these clauses must be considered reasonable in terms of time, geographical area, and the scope of the restriction.

In most cases, a court will only enforce restrictive covenants if they don't harm local commerce or hinder an employee's career. They must also be reasonable and necessary. 

Confidentiality clause

A confidentiality clause functions similarly to a Confidentiality Agreement. It prevents employees from sharing or using an employer’s confidential business information. 

Non-solicitation clause

Non-solicitation clauses prevent employees from soliciting or recruiting an employer’s clients, customers, or other employees. 

Non-compete clause

Employers can use a non-compete clause to prevent employees from using the employer’s information to gain a competitive advantage in the same field. The employer may also use a Non-Compete Agreement.

During employment, you might need to change an employee's contract. However, fundamental terms such as wages, work hours, or employment type cannot be altered without the employee's explicit consent. Furthermore, any changes must still comply with the minimum legal standards.

You'll need the employee's consent to formally amend an Employment Contract. Once an agreement has been made, you may use a Contract Addendum. This allows you to change an existing contract without creating a new document. The addendum must be signed by both parties and attached to the original contract.

Both parties are bound by the Employment Contract to uphold their responsibilities. However, either the employer or the employee may commit infractions. 

Employee breach

Common employee infractions include being late, failing to complete particular duties, and missing work without proper notice. An employee breach may result in:

• The employer responds with a warning to attempt to improve employee behaviour
• The employer issues an Employment Termination Letter to signal the end of the employment
• The employer is enforcing immediate termination 

Employer breach

Common employer infractions include unsafe workplace conditions, discrimination or harassment, wrongful termination, and lack of pay. This may result in: 

• The Fair Work Ombudsman delivers an infringement notice or a compliance notice 
• If the employer doesn’t comply, the Fair Work Ombudsman may take legal action
• The action can result in fines, payment of outstanding entitlements, and even imprisonment 

Learn more about managing employee performance on Fair Work’s Small Business platform.

Either party in an Employment Contract can end it. However, following the proper steps to avoid a contract breach is best practice. For example, an employee may be required to give their employer a Resignation Letter to officially terminate the contract. Providing sufficient notice is recommended, as it allows the employer to fill the position. 

When the employer ends the contract, they must give an Employment Termination Letter. Employees may be entitled to final pay for any outstanding wages, unused leave, or payment in lieu of notice. 

If both parties agree on ending the employer-employee relationship, they can sign a Termination Agreement. This records the end of the original contract and ensures both parties are released from their obligations.