An employment contract also referred to as an employment agreement, is a legal document business provide to their employees to understand the standards they’re expected to meet while working at the company.
Writing an employment contract can be confusing and challenging, especially for the new business owner. Failure to comply with regular changing laws between employers and employees can result in hefty fines, lawsuits, or even business closure.
In this article, I’ll cover the most important points you need to know to be able to write an employment contract and include an example as a guide for you to follow.
• Determine the nature and extent of the employment relationship.
• Ensure employees understand their roles and responsibilities, as well as conduct.
• Comply with the Employment Equity Act.
• Provide a general framework and guidelines to prevent discriminatory practices.
All conditions of employment in South Africa must meet the requirements of labour laws in the employment act. For example, if the Basic Conditions of Employment Act (BCEA) states for a minimum of 15 annual leave days, an employer can’t provide ten days.
A contract of employment doesn’t have to be in written form, although to avoid any issues or misunderstandings later, it is recommended. And for an employment agreement to be valid, both employer and employee must agree in good faith to the job role and remuneration offered.
Both parties must have the necessary ability to enter into a contract:
• When an employee is younger than 21 years of age, his parent or legal guardian must assist with contract conclusions.
• Persons under the influence of alcohol or any other addictive drug do not have legal contractual ability.
• The employee must be able to deliver the services as agreed on. And the employment contract may not conflict with any principle of any law.
There are different types of employment agreements or contracts offered, depending on the employment status of individuals. But the most popular types are:
• Permanent employment contracts – For employees who will work part or full time and are paid a monthly salary or hourly rate. This type of contract is ongoing, and no specified termination date is mentioned.
• Temporary employment contract – For an employee who works full-time or part-time for a fixed period.
• Other contracts you may want to consider is a freelance contract or independent contractor agreement.
Title the employment contract
It’s important to state what the intention of the document is so the person for who it is intended for understands its main purpose. For example, you could name the document “Employment Agreement” or “ABC (PTY) LTD Employment Contract.”
Identify the parties
A contract of employment should highlight which parties are entering into the contract.
Example: ‘This employment contract is between ABC (PTY) LTD. (‘the Employer’) and Simone Johnson (‘the Employee’).’
Duties and responsibilities of the employee
Each employees’ duties and responsibilities will be different, depending on their role. But if you were hiring a sales consultant for example, they might be responsible for:
• Scanning and contacting a database for new leads
• Schedule meetings to demonstrate how a product or service works.
• Reach KPIs and revenue targets set by management
When you list responsibilities and objectives, you are showing the employee what you expect from them and their role. They can then make an informed decision about if the job role is a good fit for them.
Duties and responsibilities of the employee
Each employees’ duties and responsibilities will be different, depending on their role. But if you were hiring a sales consultant for example, they might be responsible for:
• Scanning and contacting a database for new leads
• Schedule meetings to demonstrate how a product or service works.
• Reach KPIs and revenue targets set by management
When you list responsibilities and objectives, you are showing the employee what you expect from them and their role. They can then make an informed decision about if the job role is a good fit for them.
Compensation and Benefits
Being transparent with employee compensation in your contract is vital to the loyalty and full commitment the employees will have to your business. You also want to make sure that the conversations you’ve previously had with your employees about remuneration and benefits are also listed clearly in the employment agreement.
Below is what you should consider including in the compensation section of the contract:
• What the employee’s compensation package is
• How overtime is calculated
• How the employee will be paid
• Any other bonuses for reaching or exceeding targets
• Unpaid vs paid leave
• Insurance and pensions
Working hours and location
Working hours and place of work must be clearly defined for the role. If the principal place of work is at the office, with some flexible work from home days when agreed by management, don’t forget to include this small detail in the employment agreement.
A defined duration where the employee is basically “on a trial” and may be terminated if deemed unsuitable for the role.
The termination section is usually one of the most referenced parts of an employment contract, mainly due to employees moving on and accepting other positions, they would want to know what’s required to end their employment. It’s important to include a notice period depending on how long the employee has been with your company, but usually 30 days is required.
A confidentiality clause or agreement, also referred to as a non-disclosure agreement, highlights the methods, clients, and other sensitive information of the business and cannot be shared with any future employer or in some cases, the same industry of work.
Along with these guidelines, you can find a free employment contract template here and here.
Please note that the templates are very basic and might not be 100% aligned with your business requirements. Feel free to reach out to me and be sure your contracts are written accurately.
If there is something I want you to know about me right away, it’s that I have a passion for supporting business owners. I believe in the future of South Africa and that there are so many opportunities out there to be successful and to make a change to our economy.
I want to be part of that change by providing businesses with core HR and Labour Solutions that will not only result in legislative compliance but actually positively impact their bottom line.
Over the years I have gained practical HR experience working in various sectors such as mining, construction, financial services, and corporate legal. As a business owner myself, I can relate well to businesses and what their needs are.
