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Employment contracts serve employer and employee fairly

Perhaps you are launching a new business, or perhaps your company is expanding, and you need more staff. You want to offer an employment contract that provides the appropriate work-related details for the employee and, at the same time, protects both you and your company from potential legal issues.

The employment contract should serve both parties fairly, and the language used is very important. The wording must be simple and clear so that the prospective employee has no trouble understanding what is meant in any of the sections. Here are five elements to include.

1. Position definition

Define the position so that the prospective employee has a clear understanding of what the job entails. Include the name of the position, such as Office Manager or Domestic Sales Coordinator, and the basic duties associated with the job. Include the hours and place of employment.

2. Performance expectations

Describe the skills that this position requires and the performance milestones you expect this employee to achieve. If this is a sales position, the contract may include goals for bringing new business into the company.

3. Compensation

The employment contract should spell out the type of compensation the new hire can expect: salary, hourly pay or commission. If the latter, explain how the company will handle draws against commission. Also, include the company’s overtime policy.

4. Employee benefits

A good benefits package is very important in the hiring and retention of top employees. Use the employment contract to describe company benefits, such as the health care plan, and include the percentage, if any, that the employee will have to pay. Describe stock options and retirement plans, if any. This is also the section of the contract in which to spell out your vacation time, holiday and sick leave policies.

5. Termination

A good employment contract must describe the company policy on termination. Define “with cause” or “without cause” and explain the severance terms that apply.

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