Employment contracts are drafted at the most optimistic moment in the relationship and read at the least. Their real function is to settle, in advance and in calm conditions, what happens when things go wrong.

Employment law changes and its application depends on the facts. Treat this as a checklist of what to think about, and take advice on your specific contracts.

Put it in writing, and give the employee a copy

A written contract, signed by both parties, with the employee holding a copy, is the baseline. Verbal arrangements are not automatically invalid, but in a dispute the party with no documentation is at a serious disadvantage.

The copy matters. A signed contract sitting only in the employer's file is regularly challenged on the basis that the employee never received or understood it.

Identify the parties and the start date precisely

The legal employer's full name — not a trading name or an abbreviation — and the exact start date. Where an employee has moved between related entities, or from casual to permanent status, the date from which continuous service runs should be stated explicitly, because entitlements calculated on length of service depend on it.

Describe duties broadly enough to remain true

A job description that is too narrow becomes an obstacle the first time the role evolves. One that is too vague makes performance management difficult, because there is no agreed standard to measure against.

The workable middle is a clear statement of the core role plus a reasonable flexibility clause, so duties can be adjusted within the same general scope without renegotiating the contract each time.

State pay completely

  • Gross salary and the payment frequency
  • Every allowance, and whether it is guaranteed or discretionary
  • Whether bonuses are discretionary — stated explicitly, because a bonus paid three years running is frequently argued to have become contractual
  • The statutory deductions that will be made
  • The date of the month on which salary is paid

Probation: length, purpose and what happens at the end

Probation only works if it is used. State the period, what will be assessed, and what happens at the end — confirmation, extension where permitted, or termination on the applicable notice.

The common failure is silence: probation passes without any assessment, the employee is deemed confirmed by default, and the opportunity to address a poor fit cheaply is gone.

Notice: the clause that decides the cost of an exit

Notice periods should be stated for both sides and should reflect any statutory minimum. Say whether payment in lieu is permitted, and be aware that long notice periods cut both ways: they protect against sudden resignation and they make dismissal more expensive.

Confidentiality and property

Define what is confidential in terms the employee can apply — client lists, pricing, payroll data, designs — rather than a vague catch-all. State that the obligation survives the end of employment, and set out that company property, data and access must be returned on exit.

Restrictive covenants preventing someone working for a competitor are treated cautiously by courts and are enforceable only where genuinely reasonable in scope, geography and duration. An overbroad clause is often worth nothing at all.

Discipline and grievance

Reference the procedures rather than reproducing them, and make sure the referenced documents actually exist and are given to the employee. A contract pointing at a handbook nobody has ever seen is weaker than one that points nowhere.

Review contracts periodically

Template contracts drift out of date as law and practice change, and roles change faster than paperwork. A periodic review — are the terms current, do they match what people actually do, are signed copies on file for everyone — is unglamorous work that pays for itself the first time a dismissal is challenged.