There are many tools employers can use to facilitate a successful employment experience.
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Nondisclosure and non-compete agreements protect the company from the possible negative outcomes associated with losing a key employee to a competitor. Yet the most powerful tool in an employer's toolbox may be an employment contract.
If it's executed properly, an employment contract creates a binding agreement between an employer and an employee. It establishes the terms of the employment arrangement for a limited term of service, after which the relationship will end or a new employment contract will be created.
However, employment contracts may not be all they are cracked up to be. There are also some significant downsides to using employment contracts in a small business. An employment contract kit is a useful resource, but here are some of the things you need to consider.
Pros & Cons
- Pros. Employment contracts have several benefits for small business owners, especially those who are making a significant investment in a handful of key employees. Since the contract locks the employee into a specific timeframe, you minimize the risk of losing the investment you have made in a valuable staff member. Employment contracts also offer job security for employees and can be used to attract talented applicants during the recruitment process.
- Cons. Employment contracts are mutual agreements; they lock your company into an employment arrangement for a set period of time. Although most contracts stipulate conditions for termination, it is much more difficult to terminate someone covered by an employment contract than it is to fire an at-will employee.
Employment Contract Kit Materials
The foundation of an employment kit consists of an employment contract template that has been thoroughly vetted by legal counsel. The information contained in the template can be modified on a case-by-case basis, but standard issues that need to be addressed include term, compensation, termination policy, dispute resolution procedures and nondisclosure/non-compete clauses.
Once executed, the employment contract should be signed by both parties and archived for future reference. If possible, consider including the signature of a third-party HR representative to seal the deal.