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Employment Contracts

In my 20+ years in senior corporate HR roles, I have been asked a lot of questions! Some may only require a common-sense answer, but others have me reaching for the relevant Award, legislation or employment contract to answer. Now I am running my own business, I realise that there are many aspects of employing and managing people that can be a minefield, especially for small business owners.

This article answers some of the key questions I often get asked with regards to employment contracts and highlights the aspects you need to consider to ensure you are getting it right for your business.

Q. Why are employment contracts important?

When you enter into any relationship, it’s important to have a written agreement regarding the terms. An employment contract is an agreement between an employer and an employee that sets out the rights and obligations of each party.  The law requires certain conditions to be met before it will recognise an employment contract.  Employment relationships can take on several different forms and each form will create certain rights and obligations on the parties involved.

In developing employment contracts there are many elements you must consider so you can ensure they are right for your business and employees. A well-written contract can benefit both parties. For the employee, a contract gives them the security that they are working for a professional business that has clearly defined its obligations and agreement on all terms of employment.

For the employer, you have the security that the employee is fully aware of their obligations and has agreed to comply with the stated terms. Contracts can also protect your business through the use of clauses relating to intellectual property, confidentiality and post-employment restraints and obligations.    

Q. What minimum standards do I need to ensure my terms and conditions of employment meet?

National Employment Standards, minimum wage and modern awards form the safety net for employees under the national workplace relations system. The statutory safety net comprises:

  • Modern awards
  • the National Employment Standards (NES)
  • the national minimum wage orders made by the Fair Work Commission

The National Employment Standards set out minimum conditions of employment relating to:

  • Maximum weekly hours of work
  • Request for flexible working arrangements
  • Parental leave
  • Annual leave
  • Personal/carers leave
  • Community service leave
  • Long service leave
  • Public holidays
  • Notice of termination and redundancy pay
  • Fair Work information statement

The NES is supplemented by the National Minimum Wage, which stipulates minimum base rates of pay for adult and junior employees, trainees and workers with a disability.  These only apply to award or agreement free employees. For over 60% of the employers and employees subject to the Fair Work Act 2009, the safety net is also supplemented by a modern award or an enterprise agreement.

Q. How do I make changes to an employment contract for an existing employee?

If you are seeking to make a change to an employee’s job or role, or other terms or conditions of his or her employment, you need to first ascertain whether the change can be implemented without the need to obtain employee consent (i.e. It is a change within managerial prerogative, for example, to vary or implement policies dealing with a particular matter).

Alternatively, if the change cannot be made as part of managerial prerogative, you need to ascertain the likelihood that the employee will consent to the change.

Examples of such changes include:

  • introducing or removing a level of management (which changes authority, status and reporting lines)
  • relocating work teams
  • reallocating a job function or responsibilities for certain tasks to another employee or third-party contractor
  • moving or closing a work location
  • requiring an employee to perform work in a different way
  • changing remuneration or employment conditions

Any changes should be discussed with the employee and agreed to in writing.

If you would like a free review of your existing employment contracts, please call me, Esther Colman on 0423 326 774 or 02 8052 3355.

Disclaimer: This article provides general information only on the subject matter covered. It is not intended, nor should it be relied on, as a substitute for legal or other professional advice.