7 Things You Need to Include in an Employment Contract

Since you’re relatively inexperienced with hiring, you’ll need some solid HR practices and hiring techniques to expand your current team successfully. It’s always about working smart rather than hard so, let’s take some time to go through the most important things your new employment contract template should include.

1. Job Information

The first, most essential thing in an employment contract is job information. It should include key details on what the role is and the department, team, and job title.

Your new employees have to be able to clearly understand what their role requires them to do, who they will report to, and how their performance will be evaluated.

In this section, you need to thoroughly explain all these essential details to make sure you’re on the same page with your new candidates.

2. Benefits and Compensation

Every new employee will be interested to know about the benefits and compensation package. The package includes all critical pieces of information about:

  • Hourly rate
  • Annual salary
  • Details about incentives, bonuses, and raises
  • How to obtain benefits
  • When an employee is entitled to compensation and benefits

Now, your employment contract should also include the benefits plan and the types of insurance your company offers, whether it’s eye care, dental, medical care, or something else.

The contract should also include details about what the employer covers for and what percent the employee pays. If there are any fringe benefits, stock options, or the 401(k) plan, they should be mentioned.

3. Vacation, Sick Days, and Time off Policy

This particular detail requires your special attention. Since all employees will be more than interested to know your time off policy, it’s crucial that you thoroughly explain how things work in your company. Include the following information:

  • The number of paid vacations days per compensation period
  • Does long tenure increase the number of vacation days?

Besides this, you also need to address your standings on unpaid leave, family emergencies, and sick days. Your new employees have to know their options if they need to take some time off for any reason. Finally, include the chance to make up hours by working over weekends and after hours.

4. Employee Classification

Since insurance and tax compliance are essential things to worry about in both personal and professional life, clearly state your employee classification to let your new employees know if they’re contractors or employees.

Aside from establishing a healthy relationship with your new hirees, this will also ensure that you avoid facing lawsuits due to employment misclassification.

This helps you showcase your business as a professional and caring organization that pays attention to individual development and invests in developing a healthy company culture.

Therefore, do some research on the main differences between employees and contractors to classify your new talent correctly and allow your newly expanded business to thrive.

5. The Employment Period and Working Schedule

The next vital thing to include in your new employment contract is the employment period. Elaborate on whether your new employee is permanently employed or your offer includes a set term. If you only need an ongoing term, have that information too.

The working schedule is what determines the employer-employee relationship. Since each working person wants to when they are expected to work, make sure you clearly define the working schedule and the number of hours.

If there are any flexible working options, mention them too. Employees will appreciate knowing they can work remotely or from home if the situation calls for it. Make sure to mention any working weekends and night shifts, as well as how often and when.

6. Confidentiality Agreement

Today, every business has to think about protecting sensitive business, client, partner, employee data, and business trade secrets. With that in mind, have your new talent sign a confidentiality agreement within the employee contract.

Simply include this section in your new contract. Use this section to cover the use of email and social media on company property to avoid any awkward situations from happening.

7. Termination Terms and Conditions

The last thing to include in your contract is the terms and conditions of termination. It’s crucial to cover all details regarding requirements for either party to terminate the employment and relationship.

This includes the amount of notice required and in which form you prefer to receive it. If there is an outplacement or severance plan, make sure you include that information as well. There are situations when an employee or employer decides to part ways. In case this situation occurs, having a plan is an excellent way to maintain a positive employer brand.

Additional Considerations

Aside from these seven essential things, there are a couple of considerations more to think about:

  • Working conditions and termination terms – if either party gives thoughts to terminating the relationship, they should transparently know what options they can count on. Explain the termination requirements and include the type of notice required, its amount, and whether it should be written.
  • Outplacement or severance plan information – even though it’s way too early to think about this, it’s always better to be prepared for whatever may come. It’s a normal and quite common situation when an employee or employer decides to part ways in an agreement. As the employer, you will want to do this in the most painless manner possible as your primary goal should always be maintaining a healthy and positive employer brand. If this situation occurs, take offering an outplacement or severance plan into consideration to part ways in a friendly manner. Keeping healthy relations with former employees is one of the best references you, as the employer, can get. Former employees can bring more talent to your doorstep if you treat them well. Therefore, if things are right between you and your employee, you should offer a gesture of goodwill from your part.
  • Requirements after termination – at some point, an employee will leave the company. They should be well aware of the mandates or restrictions their contract includes. Although you can add these things to your contract, later on, it’s best if you let your employees know right away, as some of them may ask on their own. On the other hand, this also helps protect your clients, operations, and business. Commonly, employers ask their employees not to start similar or the same business in the same industry within a predetermined window of time. They also ask their employees not to work with the company’s associates, partners, or clients independently.


All these basic elements of your employment contract make for a fine starting point. However, you should do thorough research on what else you should include when defining the business relationship and the role further.

Keep things simple and transparent, informative, but easy to understand. Paper forms are out of date, so we suggest that you stick with digital templates and a paperless signing process.


Kimberly Clark

Kimberly Clark

Kimberly Clark is a content marketing specialist in IT & SEO, who helps clients increase their revenues by improving their organic traffic and building powerful campaign through Google Adwords. She can be reached via email at kimberly@linkingaces.biz.
Kimberly Clark

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