Employment Contract Template

An employment contract or agreement is essential for businesses in various industries. It consolidates the hiring process and sets up a foundation for the employer-employee relationship by ensuring all terms and conditions are explained, and no ambiguity is left.

Designing a template for an employment contract is a great way to protect both the organization and the employee from future disputes.

You need to consider some aspects before designing a template for your business. In the following lines, we will discuss what an employment contract is, why it is important, how many types of employment agreements exist, tips and tricks on how to write one, and a template as an example that will guide you.

What is an employment contract?

An employment contract is a legally enforceable contract between the employer and employee that is essential in establishing clear guidelines and safeguarding both parties. It outlines their rights, obligations, and responsibilities during employment and guides a harmonious work relationship.

The following components are typically included in an employment contract:

  • Start date
  • Duration of employment
  • Job title and description, job responsibilities
  • Work schedule
  • Employee compensation and benefits
  • Confidentiality clause
  • Non-compete clause
  • Employer’s regulations, procedures, policies
  • Termination of employment

As a rule, an employment contract will be signed by both sides after the job offer has been accepted and before the first day of work.


Why is an employment contract important?

Having employment agreements for all your employees brings several benefits for both the employer and the employee. Here are some:

  • An employment contract clearly outlines the employee's expectations and the consequences of non-compliance. This clarity informs the employee and prepares them for their role, fostering a sense of being well-informed and ready.
  • Employment agreements are binding documents that create obligations for both parties. This mutual commitment minimizes the risk of legal disputes in the future, giving both the employer and the employee a sense of safety and security.
  • It provides the employee with a better job security.
  • If your business operates in an industry where confidential information is key, consider including a confidentiality clause in the employment contract. This will protect your organization and sensitive information.


How is an employment contract offered?

While the written form is the most common, this is not always the case. Therefore, two more forms of contract offering exist apart from the written employment contract. Let’s go over every one of them:

  • A written contract is the most used form of employment contract because it includes every piece of information regarding the employee-employer relationship. Since both parties signed it, it’s easy to reread it in case of disputes.
  • Verbal contract - a non-written employment contract that is not very popular since it’s hard to enforce. A verbal contract can be offered during a discussion with a hiring manager. If a witness is present to testify to the existence of the discussion, a verbal employment contract is in place.
  • An implied contract is neither written nor verbal, so there is no formality. When an employer and employee do not speak explicitly about employment and don't sign a document for it, but the employee still starts to work in some capacity, this is when we speak about an implied contract.


Types of employment contracts

Understanding the different types of employment contracts and their unique features is a key step in making informed decisions and avoiding potential legal issues. By the end of this section, you'll be equipped with the knowledge to choose the most suitable contract type for your business, considering its needs, specifics, and the industry it operates in.

Permanent employment contract

This type of contract is offered indefinitely, providing employees with a sense of security and stability. It assures them of their employment, regardless of unforeseen circumstances, fostering a feeling of value and reassurance.

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Fixed-term employment contract

As the name suggested, this type of contract has a clear start and end date. It’s designed for specific projects or seasonal workers.

Casual employment contract

This type of contract does not require a set number of worked hours. In case of demand, the employee will be called in for work when the employer needs it. It’s a variety of contracts that offer flexibility for both parties.

Related: How do you calculate salary per hour?

Freelance contract

In this case, there is no employee or employer in the traditional sense. A self-employed person offers services to an organization for a specific project or a determined period. Also, freelancers do not get benefits, as usual employers, and they pay their taxes.

Zero-hours contract

This type of contract does not guarantee worked hours for the employee on call. The employee will need to work when the employer requests it. Unfortunately, this form of contract generates no guarantee regarding income for the employee.

Apprentice contract

This kind of agreement may be advantageous for individuals who want to learn a trade or profession. The apprentice will be offered training, mentoring, and a wage during the contract.

Union contract

This type of contract is a standardized legal agreement explicitly designed for employees who join a local/regional, or national union of workers. In practice, this variety of contracts is extremely favorable for employees because their main goal is to protect workers' rights and benefits.


How to write an employment contract?

An employment contract must include all the aspects that define the employee-employer relationship. Here are all the elements you need to consider and add to the template you design for your organization:

1. Job Description

This section will include the job title and description; you need to ensure they’re very clear. All the duties that will be the employee’s responsibility should appear here. Also, it’s a good place to specify the type of employment. You can decide on either at-will employment, no exclusivity, or binding authority employment.

At-will employment - either the employee or the employer can terminate the contract for any reason at any given time.

No exclusivity - both parties can enter other employment agreements simultaneously as the current one.

Binding authority - without written consent, the employee cannot force the employer to make any commitments.

2. Duration of employment

This section should include the starting date and time, as well as the end date if one is agreed upon. You can also include the type of employment in terms of worked hours (permanent, fixed, freelancing, zero-hours, etc.) and the employment location.

3. Employee compensation and benefits

Regarding compensation, the first decision is whether the employee will be paid an hourly or fixed salary. Then, make sure you include the frequency of the payment compensation.

This section should include benefits such as paid time off, holidays, insurance, and health insurance. If there is any opportunity for promotions and salary raises, make sure you also include them here.

4. Confidentiality and non-compete clause

A confidentiality clause is needed when the organization has trade secrets and intellectual property to protect sensitive information. In this section, the employer will very clearly express what the employee can and cannot divulge.

A non-compete clause refers to the circumstance in which an employee leaves the company and is obligated not to take any client or colleague with them for a specific period.

5. Termination clauses

This is a very important section where all termination cases must be included. Make sure you clarify how and why the employee can terminate the contract, as well as the financial consequences and a severance package if that’s the case.

There are several types of early termination:

When the employee resigns, the custom is that they will receive the salary through the last day of work. In this section of the contract, ensure to include if the employee is entitled to any kind of commission or bonus after the end date.

It’s the case when the employer ends an employment contract before the agreed end date as a result of the employee’s actions. It’s crucial to include exactly which actions will lead to termination, such as bad behavior, intentional misconduct, breach of contract, job abandonment, or felony. Usually, in these circumstances, the e employee will be compensated through the last worked day, but there will be no further compensation.

  • Termination without cause

If the employer terminates the contract for a reason not incorporated in the “for cause” section, we will discuss termination without cause. As for financial compensation, the rule is the same: the employee will receive the salary up to the last day of work.

  • Death and disability

In unfortunate cases of disability or even death of the employee, the contract must outline what compensation the employer will offer to the employee’s estate.

6. Dispute resolution

Should a disagreement emerge between both sides, this section must explain how it will be handled, the means of arbitration, and who will be in charge of paying an attorney.

Hopefully, you are more aware of how crucial an employment contract is.


Employee Contract Template

We offer a free template you can customize according to your company’s needs.

Employee Contract Template



Who should sign an employment contract?

Any employer, human resources manager, or recruitment specialist should use an employment contract for every new hire. It’s an excellent tool for outlining the job description, responsibilities, and expectations of both parties.

There are some specific cases when an employment contract is more important than usual:

  • Union represented employees, either from the public or the private sector
  • Senior positions usually involve an attorney on both sides negotiating the contract.

Can the template be customized for various job roles?

Sure! Our template is flexible and easy to adapt to any industry, role, job title, and company!