Are Employment Contracts Necessary For Small Businesses?

employment contracts for small businesses

Employment contracts are an essential document for both staff and employers, legally establishing the working relationship and setting out important frameworks and policies. And contracts can protect you against some serious problems with professionals and top management as well. This might include trade secrets or knowledge of other sensitive materials. In this case, you would want to include a confidentiality clause in the contract to prevent the employee from divulging this information during and after the end of the contract. For small businesses, I recommend presenting, at least, a written offer letter that sets out pertinent details, plus getting the new employee’s acknowledgement and adherence to the employee policy manual, if you have one. The main difference is that an employee has federal and state withholding taken from their pay by the employer while an independent contractor is responsible for payment of their own taxes to federal and state authorities.

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Create an employee contract that is unique to each employment relationship by covering these 10 details. After the miscellaneous provisions, some contracts include a brief paragraph before the signature lines. However, this is not necessary for the contract to be legally binding. If the employee will be creating content for you or working on the development of new inventions, methods, or programs, include a clause in the contract specifying that the company owns that intellectual property. For accrued time, the contract should include how those hours are computed and when the employee can make use of them. If notice is required, state how far in advance the employee must let you know if they want to use their leave. If you’re hiring the person as an independent contractor, check the rules and regulations at the U.S.

Employment Tax Obligations

Consider collaborating with the employee in order to create a comprehensive contract. “Both parties should put great thought into clearly defining the duties and authority of the employee to avoid confusion and misunderstandings as to expectations,” said Sietel. Employment employment contracts for small businesses contracts that are imposed unilaterally, rather than by genuine mutual agreement between worker and employer, are at substantial risk in the courts. If the employee is found to have entered into the contract under duress, the agreement will be struck down.

  • This helps to ensure they are legally treated according to the protections offered by the law.
  • As a small business owner, you might feel that employment contracts are unnecessary, especially if you’re just working with a contractor or remote assistant.
  • These must be carefully defined because employment contracts are legally binding.
  • Cases involving a breach of employment contract often award the employer with remedies such as money damages, restitution, rescission, reformation, and specific performance.
  • After completing, both parties are advised to take the document to their respective legal counsel.

Please be aware that our agents are not licensed attorneys and cannot address legal questions. At-Will which means this Agreement may be terminated at any time by either the Employee or Employer.

Do I need a different employee contract template for a UK business?

It also provides you with legal protection and a document to reference in the event that an employee brings a dispute against your business. If you draft an employment contract, pay special attention to the termination section. You might want a clause denying certain benefits if you terminate for cause–such as committing a felony or acting in a way that’s clearly harmful. Some employees might negotiate “double trigger” clauses, in which they can resign “for good reason” and still be entitled to a severance package. An employment contract can be useful because it clearly states all the requirements of the job and all the obligations the employer is entering into. A solid employment agreement can help protect both parties in the future, if confusion or disputes should arise between the employee and the employer.

When staff feel secure in the terms of their role, they are likely to have higher performance and engagement. An employment contract can be a good idea when you don’t want the employee leaving and competing against you for business. If you could create your own fantasy Board of Directors who would be on it? CO— connects you with thought leaders from across the business spectrum and asks them to help solve your biggest business challenges. In this edition, we ask an expert what you need to include in employment contracts and agreements. These changes are vital if you want to retain your employees and attract skilled people to your business.

Elements of an employment agreement

In this article, I summarize 10 key contracts for small and growing businesses. These contracts need to be well thought out and well drafted and can be crucial to the success of a business. Ask any legal question, or have a network attorney review your document.