Employment Contract Benefits & Drawbacks

What is Employment Contract?

It is an agreement of employment condition between the employee and employer. This agreement can be either oral or written and it includes both implied and expressed terms. The employer and employee are free to negotiate over the terms of the contract but they must keep in mind that the terms of the contract must not violate the provisions of employment ordinance.

An employee agreement is a traditional document used in relationships between employees and employers for the purpose of laying out the rights, responsibilities, and obligations of both parties during the employment period.

Employment Contract

Contents of the Employment Contract:-

  • Name of Employer;
  • Name of Employee ;
  • Location of Employment;
  • Job title of the Employee ;
  • Location of work ;
  • Start date ;
  • End date ;
  • Working hours and details about the overtime pay ;
  • Pay and frequency of payment settlements such as bonus scheme, health insurance, use of a company car,   payment of tuition fees for upcoming education, etc;
  • Holiday entitlements Details of any sick pay scheme (though sick pay is not required to be paid under current legislation) ;
  • Details of pension scheme Minimum notice to end the employment relationship that must be given by both the employer and the employee.

Why is an Employment contract important?

Before the term of employment begins the employer must make the employee aware of the work and work environment he would be dealing with after joining the job. However, there is a body of statute law which deals with specific aspects of the critical relationship between employer and their employees, such as minimum notice, minimum redundancy payments also annual leave and special leave entitlements.

Is employment contract needed for all employees?

As per the Basic Conditions of Employment Act, all employees should be provided with a written document which outlines the terms of their employment (along with details like the job description, salary details, and other information) on the very first day of employment.

When a new member is employed, you must inform him the exact job description, working hours and the exact salary the person will be earning from the beginning or on the later stage it might invite conflict so anyways you need an employment contract for all employees.

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Benefits of Contract Employment

  • Abundance of work
  • Less competition
  • Higher gross salary
  • Flexibility
  • Continuous growth

Drawbacks of Employment Agreement

  • Job rigidity
  • Tax information disclosed
  • Creating a brand
  • Burden
  • Time management issue

Who can be said an Employee?

These contracts are governed by the law, making it important for employers to understand the legal definition of an employee. The Labor Relations Act defines the term employee in the following words:

“Any person, excluding an independent contractor, who works for another person or for the State and who receives, or is entitled to receive, any remuneration; and

Any other person who in any manner assists in carrying on or conducting the business of an employer.”

In simpler words, anyone who works for the business and gets paid for it should be considered as an employee – this also includes part-time members of staff but precludes independent contractors. Example: outsourced service providers.

What about the employees for Probationary Period?

When a person is employed for a probationary period some employers assume that they don’t have to sign an employment contract until and unless the probationary period is over. However, this is not the case. They just need to insert a clause about the same.

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