Most small business owners don’t get into business to become experts in employment law, and they shouldn’t have to. But at some point you hire your first person, and suddenly you need an employment agreement, and the version you find online at 9pm doesn’t quite fit your business.
This isn’t a legal deep-dive. It’s the practical version: what an employment agreement is actually for, the parts that trip people up most often, and when it’s worth getting it checked.
It’s not just paperwork
The easiest way to think about an employment agreement is as the document that sets out the rules of the employment relationship. What are the hours? What will they be paid? What are their responsibilities? What notice is required? What happens if the role changes?
A good agreement answers these questions before they become a problem.
Every employee must have a written employment agreement, and the employee should have the agreement before they start work so they have a genuine opportunity to read it, ask questions and get independent advice if they want to. If you’re using a trial period, the agreement must be agreed and signed before the employee starts, otherwise the trial may not be valid.
The parts people get wrong most often
Copying a template without adjusting it
Templates can be a useful starting point, but they aren’t a substitute for thinking about how your business actually operates.
If your hours vary, make sure the agreement reflects that. If the role is part-time, casual or fixed-term, make sure the terms actually match the arrangement. If you have particular expectations around availability, working days or other aspects of the role, make sure these are properly covered.
An agreement that doesn’t reflect reality can create more problems than it prevents.
Fixed-term roles that aren’t genuinely fixed-term
If you’re hiring someone for a genuine temporary reason — perhaps to cover parental leave, complete a specific project or work through a seasonal period — a fixed-term agreement may be appropriate.
But you need a genuine reason for the fixed term, and that reason needs to be recorded in the agreement along with how the employment will end. Using a fixed term simply to see whether someone works out isn’t a valid reason.
This is particularly relevant for seasonal businesses. If you’re hiring extra staff for winter or summer, make sure the reason for the fixed term is clear and genuine.
Trial and probationary periods used incorrectly
Trial periods and probationary periods are not the same thing.
A trial period can be up to 90 days and is generally only available when employing someone who hasn’t worked for you before. It must be agreed in the employment agreement before they start. There are also restrictions on using trial periods for employees on Accredited Employer Work Visas.
A probationary period is different. It can be used in a wider range of circumstances, but the usual rules around fair process and dismissal still apply.
These clauses are worth getting right rather than assuming the wording from an old template is still appropriate.
Agreements that don’t reflect how the business operates
Sometimes the issue isn’t that an agreement is missing something, it’s that the business has changed since it was written.
Maybe the employee started part-time and is now full-time. Their role has changed significantly. Their hours have changed. You’ve introduced a new remuneration structure or changed how work is organised.
When the employment relationship changes materially, make sure the agreement or relevant terms are updated in writing and agreed with the employee.
Policies that don’t actually exist
Agreements sometimes refer to an employee handbook or workplace policies that are either out of date or, if you’re honest, don’t actually exist.
If you refer to policies in an agreement, make sure they’re current and accessible to employees. And be clear about which documents form part of the employment agreement and which are simply workplace policies or guidelines.
What does a good agreement need to cover?
At a minimum, an individual employment agreement needs to cover the legally required terms, including the employer and employee details, the type of employment, the place of work, the hours, remuneration, how employment can be ended, and a number of other required things. The agreement also needs to be consistent with minimum employment rights — you can’t contract out of those rights.
Beyond the minimum requirements, the agreement should make sense for the particular role and business. This is where a good template can save time, but only if it’s properly tailored.
Keep it current
You don’t need a brand-new agreement every year, but you should know what your agreements say and check them when employment law changes or something material changes in your business.
That’s particularly important at the moment, with employment law changing and further changes proposed. An agreement that was right a couple of years ago may not reflect the rules or the way your business operates today.
The problem isn’t usually an imperfect agreement, it’s one that has been sitting in a drawer for years and no longer reflects reality.
When it’s worth getting some advice
A few situations where it’s worth having your agreement checked rather than assuming it’s fine:
- You’re hiring your first employee and using a template for the first time
- You’re changing someone’s hours, pay or role significantly
- You’re not sure whether a role should be fixed-term, casual or permanent
- You’re considering using a trial or probationary period
- Your standard agreement hasn’t been reviewed for a while
- You’re making changes to your employment terms or introducing new policies
You don’t need a lawyer-drafted agreement for every hire. But you do need an agreement that is legally compliant, reflects how your business actually operates and is clear for both you and your employee.
Compliant, well-tailored documentation like this is what we cover under People foundations.
If you’d like your current agreement checked, or want help putting one together properly, get in touch. We can help make sure your agreements and supporting documentation are practical, tailored to your business and fit for purpose.