Employment Agreement

What is an Employment Agreement?

An Employment Agreement is a contract for use when an Australian business hires a new employee. It is a contract or agreement between the employer and the employee and sets out the terms and conditions of the employment relationship.

What are the different types of Employment Agreement?

There are two broad categories of Employment Agreement in Australia:

• Fixed term: The employee is hired for a fixed period of time, until the end of a specific project.
• Permanent: The employee is hired on an ongoing basis. Their employment continues indefinitely, until it is terminated by either the employee or the employer.

In addition, whether they are engaged on a fixed term or a permanent basis, employees may also fall into one of the following categories:

• Full time: The employee works full time hours (normally 38 hours per week).
• Part time: The employee works a regular schedule but fewer than full time hours. For example, the employee might work business hours on Mondays and Tuesdays only.
• Casual: The employee's hours vary from week to week, with no guaranteed hours.

What is the difference between an Employment Agreement and a Service Agreement?

A service agreement is another way that workers may be hired in Australia. A service agreement is used for hiring workers as contractors rather than as employees.

The difference between an employee and a contractor is based on many factors. It depends on the entire arrangement between the business and the worker, and whether the worker is working within the business, as part of the business (like an employee) or whether the contractor is running their own business (like a contractor). Some common considerations include:

• whether the worker can subcontract/delegate the work
• whether the worker provides their own tools and equipment
• whether the worker is paid for the time worked, or based on a quote for the result achieved (eg a quote for the painting of a room)
• the amount of control that the worker has - whether the worker can choose their own hours or location of work, and what sort of control the business has over how the work is performed
• who is responsible for mistakes in the work - whether the worker has to rectify mistakes at the worker's own cost, or whether the business is responsible for any mistakes in the work

Employees have the right to some entitlements that most contractors are not - such as superannuation, guaranteed minimum wages, and paid leave (except in the case of casual employees). It is against the law for a business to incorrectly treat a worker as a contractor when they should be treated as an employee. In doing this, the business will be neglecting its various obligations such as payment of superannuation and employee entitlements. There can be significant penalties associated with this.

Further information is available through the Australian Taxation Office, the Fair Work Ombudsman or business.gov.au. We also have a legal guide called What's the Difference Between an Employee and an Independent Contractor? which also addresses this matter in more detail. Consider getting legal advice if further information is required.

Is it mandatory to have an Employment Agreement?

No, but it is highly advisable to have one. Having a written Employment Agreement helps protect the interests of both the employer and the employee. It also helps ensure that both parties understand the terms, and are able to enforce their rights.

Who can enter an Employment Agreement?

The employee and the employer should sign the Employment Agreement. The employer could be a company or other business entity (such as a partnership). The employer could even be a sole trader.

What can be the duration of an Employment Agreement?

An Employment Agreement can be for a fixed term, meaning that the end date is agreed before the contract is signed. When that date arrives, the employment will naturally come to an end.

Alternatively, an Employment Agreement can be permanent (ongoing) meaning that the employment does not end until it is terminated by either the employer or the employee.

What has to be done once an Employment Agreement is ready?

Once this document has been prepared, it can be signed by the parties. Both the employer and the employee will need to sign the document, and keep a copy for their own records.

The employer also needs to provide any new employee with a copy of the Fair Work Information Statement. The employer also needs to give casual employees a copy of the Casual Employment Information Statement. Both of these documents are available on the website of the Fair Work Ombudsman.

Is it necessary to have witnesses for an Employment Agreement?

No, witnesses are not mandatory for an Employment Agreement, but they are useful for evidentiary purposes. If there is ever a dispute over the Employment Agreement, witnesses can help to prove that each party's signature is valid.

Witnesses should be independent adults (aged over 18), who have the mental capacity to understand what they are doing. They should not be related to one of the parties.

What must an Employment Agreement contain?

An Employment Agreement should contain all of the key terms of the employment relationship, such as:

• The employer's name
• The employee's name
• Job title and description
• The employee's start date
• The employee's job duties
• The employee's normal working hours
• The employee's salary or wages including the amount and frequency of payment
• Any other employee benefits such as superannuation
• The employee's leave entitlements such as sick leave and annual leave
• The primary work location
• Termination process

Which laws are applicable to an Employment Agreement?

The Fair Work Act 2009 (Cth) applies the National Employment Standards (NES), which are a set of minimum employment standards in Australia. Further information is available from the Fair Work Ombudsman.

In addition, each state and territory has legislation that deals with various employment matters such as occupational health and safety or discrimination.

This Employment Agreement does not take into account the requirements of modern awards or enterprise agreements. If such an award or agreement applies, then that will set out some additional minimum standards with which the employer must comply.

General principles of contract law, as provided by the common law, may also apply.

How to modify the template?

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.