Why Your Employee Contracts Are Important by #NewToHR

Why Your Employee Contracts Are Important

Contracts are an important element of business. They’re used for complicated public purchases, spanning hundreds of pages long, helping to protect the public body and its supplier from losing money or receiving a product that’s not fit for purpose. They’re also used for simple transactions like the sale of creative services by freelancers. 

In fact, contracts are a part of everyday life that often go unnoticed. They’re found on every website in the form of terms and conditions pages and are used by large companies like PokerStars who use them to set the conditions for the use of its software, as well as small independent businesses like Pipers Farm who set out the terms for the sale of their meat products

In most cases though, the average consumer overlooks these terms or blindly clicks “accept” without reading them. However, when it comes to starting a new job, contractual terms can’t be ignored since such a big deal is made about them being signed by HR departments. 

They’re often one of the first things that an employee sees when they join the company, and they’re used to provide a reference point should any issues occur further down the line.

Employee contracts are incredibly powerful documents and it can be easy to overlook some of the reasons that make them important. So when you’re drafting the terms and conditions for your next recruits, here are some factors you should consider. 

Protecting the Company

An employment contract is usually drawn up by a company with the primary purpose of protecting its own interests. It usually outlines important terms like how much the company will pay the employee, what other benefits they will receive, and when they will receive them. 

These are important as they set out expectations and prevent queries being raised later when an employee believes they should be entitled to something else. The contract provides the reference point to settle a dispute before it even arises.

Contracts will typically also outline expectations from the employee, covering items like office hours, minimum behavioural standards, disciplinary procedures, and what rights the company has to dismiss the employee. 

These again provide a reference point should the unfortunate situation of having to fire an employee occur. If they have been unable to adhere to the minimum behavioural requirements, then it will be easy to demonstrate the reason for their dismissal. 

Protecting the Employee

A well-drafted employment contract will also protect the employee, often for the same reasons.

A good contract will provide clear details of what they will be paid and by when, what is required of them, and sometimes even how their performance will be measured.

This removes any ambiguity. They know how to succeed in the company and can produce evidence that they deliver what’s required. 

Making a First Impression

There is a factor that many HR professionals overlook though: an employment contract is one of the first documents that the employee will read as they start their journey with the company. This means that the employment contract will often be used to form the first impressions of a company, something that can be difficult to overcome. 

A large, very one-sided contract that offers few benefits to the employee and gives a lot of rights to the company may leave a bitter taste in the mouth. 

For example, clauses that define the notice period should be fair and reasonable. If the employee must give you three months notice to leave, it’s unreasonable to give them only a week. 

A probationary period is common in employment contracts, but if after the probationary period the employee gets no additional job security while the employer does, it will not seem very fair. 

A three month notice period may not be unreasonable. It can take a long time to find specialist talent and recruitment processes can take a long time. However, making it reciprocal will create a perception of fairness and in reality will not cost a company significantly more. 

This first impression should also be something you consider when you produce your contracts. If employees have other options for work, they will look elsewhere and will likely compare the terms offered by other employers in the market.

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