15 Things That Absolutely Must be on Your Employment Contract

Download this template that covers all that must be included in an employment contract:

Permanent Employment Contract

An employment contract is a legally binding agreement between an employer and an employee that outlines the terms of their working relationship. It typically includes details such as job title, duties, compensation, benefits, work hours, and duration of employment.

Our comprehensive and customizable employment contract includes essential clauses on job responsibilities, compensation, benefits, and confidentiality, ensuring clarity on both parties' rights and obligations. Use this template as a reliable source for creating legally binding contracts that promote transparent working relationships.

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1. Job Details

The very first few lines of all employment contracts are dedicated to details of the job in question. To some extent, depending on the type of employment contract you’re drawing up, details might be slightly different.

Type of Contract

First and foremost, clearly include the employment contract type in both the title and the first sentence. There’s no limit on writing ‘Employment Contract’ only in the title, but it’s always a good idea to distinguish the type of contract. Sometimes, by using only one extra word like:

• Permanent Employment Contract
• Temporary (Fixed-Term) Employment Contract
• Executive Employment Contract
• Independent Contractor Agreement

Start writing the contract with some phrases like:

“This fixed-term employment contract is between [Party 1] and ….”

Job Title(s)

Not only do you need to mention the job title of the employee in the contract, but you should also include the job titles of the supervisory positions who’ll overview the new employee (if needed).

Duties/Responsibilities/Services

This is one of the most important sections to include in an employee agreement. It’s essentially a list of what the employee is expected to do in the position. For fixed-term and permanent contracts, you can write an overall list of responsibilities and duties. There’s no need to include all minute details; however, try to cover the main aspects of the job.

On the other hand, for independent contractor agreements or freelancer contracts, you want to include a precise and clear description of the services the contractor will deliver.

✨ Pro Tip: if the list of job description duties, or services is exhaustive, you can add them as a separate document (exhibit or appendix) attached to the employment contract.

Place of Work & Location

An employment contract must cover whether the job is done on-site, hybrid, or remote.

For on-site jobs: The contract must include the address of the job location(s) or possible relocations in the future.

For hybrid jobs: Should determine how many days are on-side and how many are remote.

For remote jobs: Should be clear which party will take care of the working equipment and gear.

2. Money Side: Salary, Perks, and Fees

Most of the time, parties will come up with a compensation amount during the negotiation phase. In some cases, before signing the contract, the employer sends an offer letter to the candidate which includes the important terms and conditions of the actual contract.

The salary mentioned in the contract should be the same as the amount agreed upon in the negotiation phase and the offer letter.

Expense Policies

This clause in the employment contract states that if the employee employment contract states that if the employee pays for any reason on their own behalf while working for the employer, the expenses will be covered by the company.

Details on Payment Schedule and Method

It’s important to include how exactly the transaction will take place. It does not have to be super complicated. For example, you can include a line like this: “The monthly salary will be transferred to the employee bank account.”

Although it’s customary to have the salary schedules monthly, especially for fixed-term and permanent contracts, that’s not always the case. Some positions or contract types like freelancers may use weekly, bi-weekly, or even hourly-based rates.

Performance-based Incentives and Bonuses

Want to keep your employees always motivated? Then including performance-based incentives like rewards and promotions in the employer contract is a must.

There are several bonus schemes such as AIP bonuses, or EBITDA bonuses that you can use for this purpose.

3. Dates, Schedules, Durations

Found in almost every employment contract, dates, periods, and schedules are always an essential part of these deals. Some are rather easy to grasp, but others might need clarification. That’s why you should always be careful about the accuracy of every date you enter into your contract to make sure that they don’t contradict each other.

Here are the most common dates used in contracts:

Commence Date (Start Date)

This is the very first day the employee begins their duties. Make it crystal clear when the commence date is to avoid confusion—especially when you have a probationary period or onboarding process tied to this date.

Effective Date

Not all contracts are considered effective right from the start date. The effective date is when the terms of the contract come into force. For example, someone may sign an employment contract on December 1st, while the effective date is December 15th. This means the contract’s terms like confidentiality obligations or benefits eligibility, officially start on December 15th.

Termination Date (End Date)

Fixed-term (temporary) contracts and project-based agreements have a specific end date known as the termination date. If the contract terminates but you wish to continue working with the employee, you may renew the contract.

Renewal Date

When adding a renewal date to the employee contract, you set a specific starting date for the next new contract. Renew can occur automatically, or by drawing up a new agreement. Use the automatic renewal if you want to save time and not interrupt your employee’s work. Otherwise, you need to specify what are the terms and conditions of renewal.

❗Important: Make sure you know how contract renewal is different from contract extension.

Some other important time-sensitive information found in employment contracts:

• Project Deadlines: Specific dates—usually mentioned in project-based, or independent contractor agreements— by which tasks or deliverables are expected to be completed.
• Project Timeline: The project is defined in several phases from start to finish, each with a timeline.
• Milestones: Significant checkpoints are placed in the contracts to measure progress, how the process is advanced by a certain time, and how much it is based on the goal.
• Sick Leave Accrual: Used when employees start earning sick leave and how it accumulates.
• Key Anniversary Dates: Dates related to benefits, bonuses, or eligibility for certain opportunities.
• Notice Period: This indicates the time required for either party to notify before terminating the contract (e.g., 1-year completion anniversary for bonus eligibility).

✨Pro Tip: Do not ignore time zone differences when working with international agreements. Remember, it may be January 1st in one time zone but 31st December in another.

4. Training and Development

This element is mostly seen in contracts with jobs in engineering, healthcare, IT, or manufacturing; but it’s also a great add-on to have for other roles as well. Although mostly considered as a perk for employees, the training and development programs have a great benefit for the company as well: improving employee performance and productivity.

If you decide to include training in the employment contract, consider these:

• Details about cost coverage,
• Will there be a certification afterward,
• How often do they need to attend training,
• Whether training happens during work hours or requires extra time.

5. Leaves and Vacation

Two important things that are covered by leaves and vacation sections of the employment contracts are:

1. How many days employees can take off or go on vacation
2. Whether these personal leave or holidays be paid or unpaid.

And don’t forget to include provisions for special leaves, like maternity or paternity leave.

6. Termination

One of the top must-have items on the employment contract is the termination terms. In addition to specifying a termination date, you should also include how things will work out when it comes to termination.

Important terms of terminations are:

• Termination at Will: means both parties can end the relationship at any time, for any legal reason, without prior notice or cause.
• Termination of Cause: means if the employer shows poor performance, misconduct, or violation of company policies, then the company has the right to terminate the contract—usually without giving the employee severance or other benefits.
• Severance Pay: it’s a safety net and financial compensation provided to employees when their employment is terminated, typically based on their length of service, position, and company policies.

7. Promotion and Bonus

If you want to keep your employee-to-be motivated, use promotion or performance bonus clauses in the contract to show the career advancement path within the company. Include process, and timelines—if possible— for employees to be considered for a promotion or bonuses.

8. Intellectual Property Rights

The Intellectual property rights clause is an important section for businesses to include in a contract. It typically clarifies that any inventions, designs, or other creations made by the employee during the employment period belong to the company.

9. Confidentiality Agreements

Confidentiality agreements help you to keep the business’ sensitive information safe. This clause makes the employee legally bound to not disclose certain data and information to others, especially to competitors.

Need another layer of protection? You can use an NDA (Non-Disclosure Agreement) alongside confidentiality clauses in employment contracts. An NDA specifically defines what confidential information is, for how long it should be kept confidential, and what are the legal consequences for violating the terms.

Mutual Non-Disclosure Agreement (NDA / commonpaper.com)

NDAs are essential in maintaining trust, particularly in business collaborations or negotiations, by clearly defining what must remain confidential and the penalties for any breach. In essence, an NDA serves as a safeguard, helping businesses protect their most valuable information while fostering secure, professional relationships.

In the world of business and innovation, your ideas are your most valuable asset. With our carefully designed Mutual Non-Disclosure Agreement (NDA) template, you can ensure that your confidential information, innovative ideas, and sensitive data remain protected from unauthorized access and unwanted disclosure.

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10. Severability Clause

Sometimes one part of an employment clause turns out to be unenforceable or invalid. To ensure the rest of the contract remains valid, you can use the severability clause. This is a practical way to save the other parts of the contract from becoming void due to a single problematic clause.

Read all about this clause on our complete guide on Severability Clause.

11. Governing Law

In case of a dispute between the employer and employee, the governing law clause specifies which jurisdiction’s laws should be used to settle the dispute. Since different regions have different labor laws, setting the governing law helps save time and reduce confusion in case any problem happens.

Pay attention that the governing law clause just mentions which legal framework would be used, but it does not determine how to pursue the conflict. As a matter of fact, that’s the function of the dispute resolution clause.

12. Dispute Resolution

Dispute resolution clause offers a structured process for the time that a dispute happens. For example, it could include mediation, arbitration, or litigation, depending on what both parties have agreed to. It’s a must-have clause for employment contracts since the legal process is almost always way too costly and lengthy and costly but with a good dispute resolution in place, every step is much clearer.

13. Restrictive Covenants

Restrictive covenants are a set of clauses designed to protect the company’s interests after the employee leaves. These include

• Non-Compete Clause: the employee can’t work for the competitors or start a similar business within a specified time or a place after leaving the company.
• Non-Solicitation Clause: the employee can’t reach out to former colleagues, clients, or customers to encourage them to leave the company or switch services.
• Confidentiality Clause: the employee must keep company secrets and sensitive information private, even after employment ends.
• Non-Disparagement Clause: the employees cannot make negative or harmful statements about the company, its products, or its employees.

14. Company Policies

This section of the employment contract should include all the important general rules and policies that the company sets and expects the employee to follow. It can include the following:

• Discrimination Policy: To guarantee a fair and equal workplace for all employees, most companies include a discrimination policy in all contracts. In a nutshell, it covers that no employee should face unfair treatment based on characteristics such as race, gender, age, religion, or disability.
• Sexual Harassment Policy: Not only does this section condemn sexual offenses, but it also provides steps for reporting incidents, and promises the employees that the company will take appropriate action against any form of harassment.
• Employee Handbook: All the company’s rules, regulations, and benefits should be referenced in the employment contract. You don’t have to write the policy in the contract, but you can provide it as an attachment to it.
• Social Media Conduct & Online Reputation: With the rise of social media platforms, it’s easy to place the company’s reputation in danger due to the employee’s online interactions. That’s why including a policy on the social media conduct of the employees is a must in employment contracts.

15. Signature Section

last, but definitely not least, signatures. No contract is valid without a signature. Although electronic signatures are widely used and legally binding in most jurisdictions, it’s always a good idea to include a counterparts and electronic signatures clause in the employment contract.

Draw Up a Perfect Employment Contract

Creating and managing employment contracts can be a daunting task, especially when consistency and accuracy are what you’re looking for. Thankfully, there’s a smart solution for that: AI-powered contract management tools like fynk that offer a smarter, more efficient way to handle employment agreements.

With fynk, you don’t have to start from scratch every time. You can either create your own templates and reuse them, or use one of our ready-to-fill employment contract templates that are carefully written for different employment contract types.

But apart from that, fynk also helps you to handle the whole process of handling any contracts much more efficiently and easier. The automation and AI features won’t make any errors and help you fill in details accurately every time. And, you can run an AI review using customizable playbooks to ensure that all parts of your contracts are aligned with your company policies and are legally compliant.

Ready to start handling your employment contracts more efficiently?

Author:

Rezvan Golestaneh