Being in HR for more than 26 years I have been asked some really interesting questions about what I do during that time. Some with contempt….after all every knows HR right, and others with genuine curiosity.
However, the particular question about why a business needs employment contracts is one that I find astounding in this day and age given how litigious society is. My answer, “How about $960,000 worth of reasons.”
For that I refer to 2020 case that went through NSW supreme court where an employee was awarded $960,000 by the court as settlement for notice from a job that she didn’t have a written employment contract for. During her employment she advanced from Chief Financial Officer through to a role of Director and when she was given notice, as there were no, contractual terms in place, the judge ruled 2 years notice was reasonable.
In 2022 an employee of SCT Operations also NSW based, had his redundancy payment extended from 12 weeks out to a further 8 months because there wasn’t written agreement in place to deal with this situation.
What Employment Contracts Do.
Employment contracts serve as binding agreements between employers and employees and outline terms and conditions surrounding the employment relationship. They establish a sense of fairness and transparency ensuring both parties are on the same page.
Without employment contracts in place the parties leave it to factors of common law, negotiation and legal processes to settle disputes and in an employment arena there are many angles for such disputes to arise including:
- Notice periods.
- Restraint of trade.
- Application of confidentiality and rights for intellectual property.
- Award coverage and entitlements.
- Off-set provisions.
- Probation periods.
When should I have employment contracts.
If you don’t have employment contracts between yourself and your employees, the time is now, as you are leaving the door wide open to litigation. Even those that do, please note that employment contracts should be reviewed regularly particularly if your employees have:
- Changed positions within the business.
- Been in the business a long time.
- Are being paid higher salaries with expectations of different work conditions.
- Your employment contracts are generally quite old and outdated.
Active HR’s qualified employee relations specialists are well versed in employment contracts and the modern-day standards to which they need to be written and prepared.