The Importance of a Contract

The Importance of a Contract

by Sally Andrews


A lot of the work we do at LA is liaising with employers and employees about the terms and conditions of the employment relationship. This usually occurs because of the absence of a well drafted employment contract. Ideally and a practice we promote at LA is to create a well drafted contract at the commencement of the employment relationship that provides for a clear understanding of the relationship and hopefully mitigates any risks or disagreements in the future.  An employment contract legally defines the relationship between the employers and the employees. Both parties have to sign and agree to the contract before the employee can start working. Writing an employment contract is a necessary part of hiring someone to work for you.

A good employment contract is beneficial to both the employee and the employer and sets out very clearly the rights and obligations of each party. A well drafted agreement should ideally be written in plain English avoiding to much jargon and legalistic expressions. A good employment contract will also protect the job security of the employee and protects the employer from certain risks. One very important clause that should be included in all contracts of employment is that of confidentiality.  Some business will also add a Deed of confidentiality to the employment relationship that needs to be signed by both parties.


You can negotiate any contract and an employment is no different. Well drafted employment contracts should allow for each of  the parties to negotiate terms and conditions of the employment arrangement and to provide protection and clarification for both parties during this process. This is a very important step in the employment relationship as it sets out the overall terms and conditions and ensures a clear understanding to give employers and employees definition where they stand. Dispute and argument can happen less if the terms and conditions such as basic pay, hours worked or leave entitlements are well understood and drafted. A contract of employment is a legally binding agreement between you and your employer. A breach of that contract happens when either you or your employer breaks one of the terms, for example your employer doesn't pay your wages, or you don't work the agreed hours or perform duties as required or a breach of confidentiality occurs. It is important that not all not all the terms of a contract are written down and some can be implied however, the other main aim of a contract of employment is to protects the employer as it allows regulation of the behaviour of the employee in the workplace. This is vitally important because all company policies, as well as an employer's disciplinary code, should form part of the contract of employment.

It is important to remember that the legislation and laws surrounding employment relationships are in place to protect workers from wrongdoing by their employers. Without these statutes, workers would be vulnerable to a number of threats. The key employment laws include discrimination, minimum wage, and workplace safety and health laws, as well as workers' compensation and child labour laws.