Consequences of not having an employment contract

06 May 2016|blog industrial-relations

So, you don’t think you need an employment contract for your employees? ‘It’s just a piece of paper with words’ you say, or ‘It’s ok we understand each other and they’re a good person’, or maybe, ‘But, they are covered by an award, I don’t need one’. Well, we’ve heard all that before and we’ve seen the consequences to those that have made those comments too, so please think again!

Employment Contracts are more than a letter of offer or terms and conditions of employment. Employment contracts protect your business. Not only do they provide a formal record of both parties’ expectations and agreements at a point of time, either at commencement or if negotiated and changed during the course of employment on important terms and conditions of employment such as; hours of work, leave, award coverage, remuneration, employment status, position, notice periods and position description, they also usually contain information to protect your business, some of which are unique to your business. This can include conditions relating to the requirement to have a driver’s license, the use of a motor vehicle, mobile phone, property, protection of clients and staff, confidential information, intellectual property, restraints and so on. There are also other important clauses.

An Employment Contract can make sure you stay out of the Fair Work Commission, Courts and prevent you from paying additional monies at the end of employment.

Not only do they have to be lawful but they need to see the bigger picture beyond the law. Are bonus arrangements correctly drafted? Are they linked to productivity / performance? Are they actually going to achieve the desired results? Are they based on revenues or after tax profits? How often are they payable? In regards to notice of termination periods, have you considered whether you are happy to give the same amount of notice that you require your employees? Is your employee casual or are they actually part time?

If you are still not convinced let me tell you some recent examples of situations we have been involved with, which could have been prevented through the use of a well thought out, commercially astute, customised employment contract.

Bonus arrangements need to be carefully and correctly drafted. We have seen employment contracts which have entitled employees to bonuses based on gross revenue. This cost the client a lot!
Expecting employees to provide long notice periods, for example, 6 months. This might seem ok but not when you are the employer who had to terminate and pay 6 months in lieu of notice.
Not having an employment contract at all and therefore having a dispute based around entitlements on termination of employment. This resulted in the client having to pay unexpected additional monies for entitlements for the period of employment.
You think you’re covered when you are paying over-award entitlements. Well, actually you are not when your contract does not properly outline how and what. We have seen this costing clients additional entitlements outlined in the award at the over-award rate!
Employment contracts which the employer intended to be for a fixed term. We have seen many instances where ‘fixed term’ employment contracts are incorrectly drafted resulting in the employee actually being considered an ongoing employee entitled to notice of termination and with the ability to make an unfair dismissal claim.

Legislation and Awards protect employees. Employment contracts protect employers. An employment contract certainly isn’t an unnecessary expense, it protects your business and can ultimately save you money!

At HR Business Direction we can draft customised, commercially astute, reliable and accurate employment contracts. We know the law but can also see the bigger picture beyond the law and appreciate that it also needs to be a welcoming document. Contact us here.

Leisa Messer BBus(HRM); GradDipIR; CAHRI; IRSQ
Managing Director | HR Strategist
leisa.messer@hrbd.com.au
07 3890 2066
www.hrbd.com.au