Before any contract kicks off, it is important to establish from the get-go, the terms of the contract including date of completion, compensation after completion of job, responsibilities of the parties involved, among other things.
Writing these terms in black and white nips disputes in the bud and helps to properly manage the relationship between the employer and the employee. For any contract agreement to be legally binding, the terms of the contract must be documented in an employment contract.
What is an Employment Contract?
An employment contract is a legal document highlighting the rights, duties and employment conditions making up the relationship between all the parties involved. Once signed by both the employer and the employee, its contents become legally binding.
A well drafted employment contract should protect the interest of both the employer and the employee. It includes details like term, duties, wages, confidentiality agreement, benefits, non-compete agreements, duration of employment, details of termination, expenses, employee warranties of both parties involved.
An employment contract can also be defined as a job contract, contract of employment, job contract, work contract, employment agreement and contract of service.
Types of Employment Contract?
There are several types of employment contracts. They include:
This kind of employment contract is drafted to manage the relationship between a contractor and a subcontractor. Sometimes, when a contractor receives a contract from a company or individual, they may choose to subcontract or sublet portions of the project to a subcontractor. The agreement between the contractor and the subcontractor is usually contained in a subcontractor agreement.
Independent contractor agreement
An independent contractor agreement is a contract document highlighting all the fine details of the agreement between a client and an independent contractor. An independent contractor as opposed to an employee is self-employed. Hence, the client isn’t responsible for tax withholdings.
This type of employment contract is used with employees who are paid salaries or have a fixed hourly rate. Employees who use this kind of contract are legally entitled to all employment rights in the country where they work.
Professional services agreement
Like the name suggests, this contract document is used to hire a professional to carry out some specific tasks or provide some specialized services to the client. It is often used when the relationship between the client and the hired professional is a ‘contract for service’ instead of a ‘contract of service’
At-Will employment contract
This is used to manage a special kind of employer-employee relationship where either party can walk away from the contract anytime. The employee may choose to quit at any tome while the employer can terminate the contract without cause. Without cause in the sense that they are permitted to terminate the contract with the employee for violation of public policy, disability and sexual discrimination.
Why Is An Employment Contract Important?
Unless a contractual relationship is an employment-at-will relationship, drafting an employment contract is essential. The following are some of the reasons why they are used in most climes:
- Dispute resolution
- Establishing conditions of staff leave
- Protection of employee rights
- Highlighting the responsibilities of both employers and employees
- Labor certainty for employer and job security for employees.
It is essential that both employers and employees sign an employment contract to provide good evidence for a breach of contract in the case that a legal dispute ensues. At CocoSign, you will find free independent contract, subcontractor and other forms of employment contract templates for personal and corporate use.
Employment Contract FAQs
WDoes an employer have to give reason for terminating an employee’s contract when using an at-will employment contract?
With at-will employment contracts, an employer doesn’t have to give employees a reason for terminating their contract. Still, it is only good you do so because not giving reasons may leave the employee suspicious about your decision. The disgruntled employee may then be more apt to file a lawsuit against you.
What is the difference between a professional services agreement and a subcontract agreement?
Professional services agreements are mostly used for one-time arrangements while a subcontractor arrangement is used for a continuous relationship where the subcontractor is more involved in the project for a long period.
What is the difference between a service agreement and an employment contract?
Unlike an employment contract, a service agreement is used to hire service providers.
Is there such a thing as an engagement letter?
Yes. An engagement letter is a written agreement on which the relationship between a client and third-party relationship. Like most other employment contracts, it highlights the terms of work, payment and the duties of all the parties involved.