What Is an Employment Contract?
An employment contract is a legally binding agreement between an employer and an employee that outlines the terms and conditions of the employment relationship. In Australia, employment contracts can be written, verbal, or a combination of both, but having a written agreement is strongly recommended to protect the rights and responsibilities of both parties.
While contracts must comply with the Fair Work Act 2009, they may include additional conditions that benefit the employee, as long as they don't undercut the National Employment Standards (NES) or any applicable modern award or enterprise agreement.
Key Elements of an Employment Contract
A well-drafted employment contract typically includes the following:
- Position title and duties
Defines the role, responsibilities, and reporting structure. - Employment type
Specifies whether the employee is full-time, part-time, casual, or fixed-term. - Start date (and end date for fixed-term roles)
Clearly outlines the employment period. - Remuneration
Details wages, salary, bonuses, overtime, superannuation, and payment frequency. - Working hours and location
States expected weekly hours, rosters, and place of work (including remote work arrangements if relevant). - Leave entitlements
Includes annual leave, sick leave, parental leave, and any additional leave agreed upon. - Notice periods
Outlines termination notice required by both parties. - Confidentiality, IP, and restraint clauses
Protects business interests, including intellectual property and post-employment conduct. - Dispute resolution processes
May include processes for managing grievances or disagreements.
Why Employment Contracts Matter
For Employers:
- Protects business interests by setting clear expectations.
- Reduces risk of legal disputes through documented terms.
- Provides legal backing if disciplinary action or termination is needed.
For Employees:
- Offers clarity and security on working conditions and pay.
- Ensures access to legal entitlements under NES and relevant awards.
- Protects against unfair treatment and wage underpayment.
Types of Employment Contracts in Australia
- Permanent Contracts
- For full-time or part-time ongoing employment.
- Includes full access to leave entitlements and job security.
- Fixed-Term Contracts
- For a specific duration or project.
- Ends automatically unless renewed or extended.
- Casual Contracts
- For employees with irregular hours and no guaranteed ongoing work.
- Includes a higher hourly rate (casual loading) to compensate for lack of entitlements.
- Independent Contractor Agreements
- Not technically an employment contract, but often confused with one.
- Contractors operate as their own business and are not entitled to employee benefits.
Difference Between Employees and Contractors
Common Mistakes to Avoid
- Failing to document the agreement in writing
- Including unlawful terms, such as conditions below award minimums
- Omitting important details like hours of work, duties, or leave entitlements
- Relying on templates without legal review, which may not suit your business needs or comply with legislation
Microkeeper and Employment Contracts
Microkeeper simplifies employment management by offering digital tools to:
- Store and manage employee contracts and records securely
- Track start and end dates, work status, and classifications
- Integrate onboarding with contract issuance and e-signatures
- Stay compliant with award rates, tax, and superannuation obligations
See how Microkeeper streamlines onboarding and compliance
FAQs About Employment Contracts
Is a signed contract required to begin employment?
While verbal agreements are legally valid, a written contract is strongly recommended to avoid disputes and clarify expectations.
Can an employer change a contract?
Changes must be agreed upon by both employer and employee. Unilateral changes are not enforceable.
What happens if there’s no contract in place?
The employee is still protected under NES and relevant awards, but disputes may be harder to resolve without clear documentation.
Best Practices for Employers
- Provide all employees with a written contract before they begin work
- Ensure contracts align with the Fair Work Act, NES, and any applicable award
- Review and update contracts regularly, especially after role changes or promotions
- Seek legal advice when drafting contracts for senior staff or complex roles
Final Thoughts
Employment contracts are essential tools for building trust and clarity in the workplace. They protect both employers and employees, define expectations, and ensure legal compliance. With solutions like Microkeeper, managing employment contracts becomes simpler and more efficient, helping your business stay compliant and focused on growth.
Disclaimer: This content is for general informational purposes only and does not constitute legal advice. For specific legal guidance, consult an employment lawyer or the Fair Work Ombudsman.
