Hiring staff and increasing your client base are two great ways to grow your business and formalizing a work contract is a fundamental step to achieving these two goals. Contracts will help you establish the working terms and conditions with the person or team you’re collaborating with.
Although drafting a work contract might seem a little daunting at first, it doesn’t have to be difficult or complicated! We created this guide to help walk you through creating a work contract so you can protect your company and prevent labor disputes.
By following the steps below, you can establish effective and accurate work contracts to lay the foundations for great working relationships.
What Are The Essential Components of a Work Contract?
When creating a work contract it’s essential to include all the necessary information to protect yourself and your employees. This means important contract details, summarized work conditions, and formalizing each party’s obligations. See below for more details:
Date and place
Generally the date and place where the contract is signed appear in the first paragraph of the document. This information can also be specified at the end of the contract.
The employee and contractor’s information include both parties’ full names and their legal residence.
Every contract has to stipulate the employee's compensation, its calculation, and the terms of payment. These calculations can be on a per project basis, fixed salary or an hourly rate.
If the compensation package includes other benefits, you can include them in this section as well. A few common employee benefits are:
- Health insurance
- Paid vacation time
- Savings options
- Expense reimbursements
Duties and responsibilities
In this section, you can list the tasks and expectations associated with the job. You can also indicate the employee’s working hours.
Trust is an essential element in all working relationships, especially if your company handles private information or trade secrets. You can prevent employees from leaking proprietary information by adding a confidentiality clause.
If your employee is in direct contact with clients, adding a non-compete clause can prevent the employee from offering their services to the client outside of your company.
In this section, you can stipulate whether or not parties need to provide advance notice before terminating the contract.
Optional Clauses That Can be Added Into The Contract
Depending on the job and hiring process, your work contract can also include information about:
Duration of employment
You can hire someone for a specific or indefinite period of time depending on the duration of the job.
If your employee is eligible to receive additional payments when they leave the company, you can include an article about this in their work contract.
Types of Work Contracts
There are three types of contracts that are most commonly used in the U.S.:
This is the most common type of contract because it consists of a written document signed by both parties. If any questions or complications arise, a written contract provides a reference point for clarifying the terms of employment.
If you make a verbal job offer during a conversation, and the employee accepts the terms, this can be considered a verbal contract. In order to ensure its legality and enforceability, it’s best to have a witness present to certify the verbal contract.
Keep in mind: This type of hiring can lead to misunderstandings since there's no written documentation confirming the contract’s details.
When two people start working together without establishing the details of a work agreement, this is considered an implicit contract. Since there's no signed or verbal contract, this type of work relationship can mean that the employer doesn’t need to provide certain conditions and protections.
Keep in mind: An implicit contract can cause issues because everyone can interpret the employment agreement differently.
A Step-By-Step Guide to Creating a Work Contract
Work contracts can vary by industry and the type of employment. Below are a few guidelines to creating a general work contract:
- Title. The title is the first thing that appears in a work contract. It can have a generic name like “work contract” or something more specific like “administrative assistant employment agreement.” The contract title can also include your company name.
- Contract parties. This section indicates the parties signing the contract, in other words, the name of the employer and the employee’s full name. For example, “This work contract is entered into by Integral Design (“the Employer”) and Mario Jiménez (“the Employee.”)
- Employment terms and conditions. In this clause, you’ll establish the work schedule, services to be rendered, paid sick days, vacation, etc. It’s important to stay informed about labor laws and include them in this section.
- Employee responsibilities. This clause stipulates your expectations for the employee and their role.
- Compensation. It’s important to specify all the details about the employee’s compensation package. In addition to the base salary, make sure to include any relevant information about overtime, payment methods, paid and unpaid holidays, etc.
- Specific contractual terms. These terms can include the employee’s start date, the place of work, ways to terminate the contract, and what to do in case of disputes.
Keep in mind: In order to protect yourself we recommend that you have an attorney review the contract before sending it to your employee. With the help of a professional, you can ensure that your contract complies with applicable laws and protects your interests.
Work Contract Example
The following template is a general work contract that can be used for work agreements and adjusted for specific needs. We recommend that you consult with an attorney in order to ensure the validity and enforceability of any and all work contracts before signing them.
General work contract
On [day/month/year], this work contract is entered into by [Company name] and [employee or client name] in [city, state.] This document constitutes an agreement between both parties and is governed by the laws of [state or city.]
IN VIEW OF this work contract, the parties agree to the following terms and conditions:
The employee commits to fulfilling the responsibilities and obligations established in this contract and the job description. The employee commits to complying with all company policies and procedures.
The employee is responsible for carrying out all essential tasks and fulfilling all roles. [Company name] can add other tasks within the job scope when necessary.
The employee will be paid [x dollars] [per hour/per year/per project] before taxes. [Employer or employee] will be responsible for paying taxes on said compensation.
The employer offers the following benefits [list benefits here if applicable.] These benefits take effect [immediately/after a trial period of x amount of time.]
5. Paid time off
[The employee] is offered the following paid time off: [vacation days], [sick days], [bereavement days] after completing a trial period.
This working relationship can be terminated by any party for any reason with the appropriate written notification.
Depending on the industry you work in, your contracts might require additional clauses. You can protect your work, your employees, and your clients with specific clauses.
Below are a few sectors that need more specialized contracts:
If your company provides creative services, your employees may have access to original and proprietary information, for example:
- Graphic design elements
- Images or videos
That’s why it’s important to add a non-disclosure or confidentiality clause to your agreement.
Banks, insurance offices, and other financial institutions handle confidential client information on a regular basis. For security purposes, we recommend conducting criminal background checks on potential employees and preparing specialized work contracts accordingly.
Safety is the number-one concern for daycare centers or any job where employees work with people under 18. That’s why it’s important for your work contracts to include industry-specific legal stipulations.
Teleworking has different characteristics than in-person work and therefore requires special contracts. If you hire employees in other cities or states, you’ll have to account for the applicable local laws. If there's a time difference between you and your employees, you’ll also want to consider how this will affect work hours. With a specific contract, you can put these details in writing in a legal manner.