HRwisdom have added a new Contract of Employment template to the HRwisdom Library.
The 21 page document includes explanatory notes to help you create a written employment contract to suit your requirements and circumstances.
We have also included additional employment contract information on this HRwisdom Blog post to help you understand some of the key issues.
The employment contract template can be used by all employers throughout Australia, except the following excluded employers:
- non-constitutional corporation employers in Western Australia
- State public sector employers; and
- Local Government employers — except in Tasmania
The contract is suitable for full-time and part-time employees of all employers who can use the contract. The contract is not intended to apply to casual employees or independent contractors.
Employment Contract Coverage
The contract considers coverage of the following matters:
- nature and status of employment
- reason for the contract
- commencement date
- employer details
- employee details
- position
- general details
- probationary/qualifying period
- reporting relationship
- location of employment
- hours of work
- remuneration
- return of property
- deductions
- confidential information
- policies and procedures
- superannuation
- period of notice and
- termination.
You may also consider amending your contract to reflect your position on optional clauses concerning:
- compensation for all legal entitlements
- guarantee of annual earnings
- annualised salary
- intellectual property
- reporting lines
- non-cash benefits
- bonus and incentive payments
- performance review
- salary review and post employment obligations
- company credit card
- mobile phone
- laptop
- performance
- driver’s licence
- drugs and alcohol
- uniforms
- continuing education
- leave
- public holidays; and
- resignation from offices held.
Particular matters to consider:
Circumstances for making the contract
The reason for making a contract of employment will differ depending on the circumstances. This will, in turn, affect a number of clauses. So, for example, a new employee will be entitled to either accept or reject the contract of employment. However, an existing employee who does not receive any benefits from signing the contract (eg additional remuneration) may decline to enter the contract.
An employer who is using the contract for award covered or enterprise agreement covered employees may wish to supplement the contract with an Individual Flexibility Agreement (IFA). Those employers may also give consideration to utilising optional clauses such as:
- compensation for all legal entitlements
- guarantee of annual earnings
- annualised salary
HRwisdom Library members should be aware that it is not possible to ‘contract out’ of an industrial instrument using a contract of employment. Accordingly, if an employee is entitled to minimum conditions of employment in accordance with an industrial instrument, an employer should comply with the relevant industrial instrument.
Such a clause seeks to offset an employee’s total remuneration against any entitlement the employee may have under any law or industrial instrument. Adopting this approach will not extinguish an employer’s obligations under an industrial instrument or alter the fact that technically an industrial instrument was been breached, nor can it protect an employer from prosecution and imposition of a penalty for that breach. However, it does give the company good grounds to argue that an employee has been compensated in full for all entitlements and the employee should not be permitted to ‘double recover’ the amounts.
HRwisdom Library members should therefore carefully consider whether to use such a clause and whether full compliance with the award, use of an IFA, enterprise agreement, giving a guarantee of annual earning or complying with an annualised salary provision of an award is a better option.
Guarantee of annual earnings
Rather than complying with the terms of an award, an employer can instead provide a written ‘guarantee of annual earnings’ to an employee. Such a clause can only be offered to employees who are covered by a modern award and earn more than the high income threshold (presently $108,300 per annum), but doesn’t include certain remuneration elements.
The guarantee means that the employer agrees to pay the employee no less than $108,300 per annum (indexed annually and exclusive of superannuation and contingent elements such as bonuses and commissions) during the ‘guarantee period’ and in exchange for that guarantee, the relevant modern award that covers the employee ceases to apply.
The ‘guarantee period’ must be for 12 months or more, unless the employee is employed for a period which is less than 12 months. No more than 14 days can elapse from the date the guarantee is offered to the employee and the employee agrees to accept it and:
(i) the day the employee commences employment; or
(ii) a day on which the employer and employee agree to vary the employee’s terms and conditions of employment.
Annualised salary arrangement
Alternatively, some awards include a provision which allows an employer to offer an annualised salary to an employee which takes into account award payments such as overtime, penalty rates, and allowances. Where an employer offers an annualised salary as permitted by an award, the employer is then exempt from the obligation to comply with the award terms which have already been compensated for in the salary.
Post-employment restraints
Depending on the nature of the duties being performed by the employee who will be subject to the contract, it may not be necessary to require an employee to agree to a post-employment restraint. You should seek to customise the restraint to relate to the specific employee.
In order for a post-employment restraint to be enforceable it must be ‘reasonable’ in the circumstances of the particular employee’s employment. Specifically, the restraint must be reasonable in relation to the activities sought to be restrained, the geographic area, and the duration of the restraint. The courts will not enforce restraints that impose an unreasonable restraint of trade on an employee, or that extend beyond protecting the legitimate business interests of an employer.
The particular restraint clause included in the contract includes provisions enabling a court, if it is to review the contract, to read down the covenants in relation to the employee if they are found to be void, invalid or otherwise unenforceable. ‘Reading down’ the strict wording of an unreasonable clause means to modify it until the clause is expressed in a way that is legally enforceable.
Link to policies and procedures
There is an increasing willingness of courts to incorporate policies into employees’ contracts of employment. Contracts of employment that do not expressly exclude such incorporation may cause problems for employers. While the contract contains an express exclusion, it is important that employers both comply with and broadly word their policies and procedures, to further reduce this legal risk.
Other leave
The ‘Other Leave’ clause in the contract indicates that long service leave, parental leave, and compassionate leave entitlements will be made in accordance with legislative requirements.
Withholding amounts from employees
The employment contract template indicates that the employer can withhold remuneration from the employee where the employee fails to provide the employer with adequate notice when terminating their employment, or fails to return employer property in a fair condition (including tools and uniforms). The general rule is that these types of clauses are not enforceable unless the employee specifically authorises the deduction. As such, the clauses allowing the employer to withhold remuneration for these reasons have been drafted to contain such an authorisation.
You should be aware however, that if the employer exercises their rights under the clauses, it is possible that the employee may make a complaint to the Fair Work Ombudsman, a court or industrial tribunal alleging the employer has not paid them their appropriate accrued entitlements or their guaranteed remuneration.
We recommend you seek legal advice if you are considering withholding remuneration from an employee. There may be other options available which can be explored.
Fringe benefits tax
A contract may allow for employees to be provided with benefits such as mobile phones, company vehicles and laptops, with limits provided for. You should seek financial advice in relation to potential fringe benefits tax liability before providing an employee with company property which the employee is allowed for personal use.
Kind regards,
HRwisdom Support
