In Australia, employment contracts are an essential way to protect both your business and staff. Whether you’re a small to medium business or an enterprise, each employee should have their own contract of employment. Employers also need to be aware of the employment awards that apply to their industry/organisation.
Read on to learn more about awards and what should be included in contracts, or speak to our experienced employment lawyers if you have any questions.
What is an employment contract?
An employment contract provides the terms and conditions which govern the relationship of employment between the employer and the employee. It can be in writing, oral or can be inferred from the conduct of the parties. However, it is always advisable to have a written document that records an employee’s terms and conditions of employment, as it can be critical during times of dispute.
Can an employment contract be changed?
The terms and conditions of an employment contract can be changed and updated at any time.
What should an employment contract include?
Every contract of employment is unique, and there’s no one-size-fits-all. However, there are a number of terms and conditions that should be included in the contract. Some of these are as follows:
- Personal details of the employee/employer
- Start date of employment and the probation period
- Job title and responsibilities
- Leave entitlements (set out in the National Employment Standards – more on this later)
- The notice period for employment termination
- Termination conditions, including redundancy
- Type of employment (full time, part time or casual)
- Post employment restraints, such as restraints of trade (if relevant)
- A confidentiality agreement
- Remuneration clause
Types of employment contracts
In Australia, the following are the most common types of contracts:
- Independent contractor (learn more: contractor or employee?)
What is an employment award?
An award is defined as the minimum terms of employment within a specific industry or occupation, such as:
- Wages (e.g. minimum wage)
- Penalty rates
- Leave entitlements (e.g. paid parental leave)
- Working conditions
- Other aspects of the employment relationship
It’s worth noting that a contract of employment can provide for wages and conditions that are over and above the award system in the relevant industry/organisation.
The modern awards system
The national workplace relations system, also known as the Fair Work system, encompasses most of the businesses in Australia. Under the Fair Work Act 2009, both employees and employers need to comply with the modern awards that apply nationally for industries and occupations.
In 2009, the Australian Industrial Relations Commission (AIRC) consolidated most of the existing awards into industry or occupation based categories to reduce the confusion surrounding proper minimum employment entitlements. From January 1st 2010 onwards, most industries are subject to the modern award system.
The National Employment Standards (NES)
In addition to the modern awards system, there are the National Employment Standards, which are 11 minimum employment entitlements that are provided to every employee. Employment contracts cannot provide for conditions that are less than the national minimum wage or the NES.
The 11 minimum entitlements are as follows:
- Maximum weekly hours
- Requests for flexible working arrangements
- Offers and requests to change from casual to permanent employment
- Parental leave and other entitlements
- Annual leave
- Carers/personal leave
- Community service leave
- Long service leave
- Public holidays
- Notice of termination and redundancy pay
- Fair Work Information Statement and Casual Employment Information Statement
Please note that only a few specific conditions of NES apply to casual employees.
- Changes to parental leave
- Workplace rights
- Difference between unfair dismissal and wrongful dismissal
Employment contracts vs awards & the NES
Every employer must understand that the mere signing of an employment contract does not mean that the employee will not be governed by the minimum conditions provided in the relevant award and the NES.
In other words, a contract cannot take away the rights of an employee which are a part of their minimum legal entitlements. Thus, these standards will continue to apply and override any contract in place which provides lesser entitlements than the applicable award or NES.
An example: if a contract of employment provides 5 days of sick leave per year, the employee will still be entitled to get their 10 days of personal leave, including sick leave, as provided in the NES.
Executive employment contracts
The situation is slightly different for employees who are managers or high-income earners. They may not be covered by the modern award applicable to the industry they work with. Such employees who do not get modern award entitlements are those who have agreed to a written guarantee of annual earnings which is more than $123,300.
How Owen Hodge can help
If you have concerns about your current contract of employment, or you need one to be drafted, speak to the executive and small business lawyers at Owen Hodge. Call us on 1800 770 780 to schedule an initial consultation.
Frequently asked questions
There is no legal requirement to have an employment contract, however making a contract makes the legal requirements of employment much easier to understand for both the employer and employee.
You can write your own employment contract, but it is highly recommended that you have it professionally reviewed by an employment lawyer. Doing so will mitigate the risk of including unfair terms and conditions in the contract.