The Importance of Employment Contracts

So, you've opened up your business and have hired employees but have not made your employees sign any kind of contract.

Should you be worried? YES!

Many small business owners fail to see the importance of employment contracts. Employment contracts provide the Employer with protection and provides the employee with security.

Protection. An employment contract may endeavor to protect the business clientele and intellectual property. For instance, the contract may have a non compete clause where the employee agrees not to enter into or start a similar profession or trade in competition against the employer. This helps to prevent the employee from exploiting resources, knowledge and/or leads that were gained from your business. By having an employment contract in place, an employer can feel secure that the employee is fully aware of their obligations and has agreed to comply with the stated terms.

Security. The employee will feel secure that they are working for a professional business that has clearly defined its obligations and agreement on all terms of their employment. By laying out the specific standards that the employer expects from the employees, employees may have an easier time complying with their required obligations and hence enhancing the employer-employee relationship.

Remember, employment contracts are legally binding. Therefore, it is important to have an employment contract in place since they provide a high level of specificity regarding the details of the employment. Doing so will allow for you and your employees to negotiate the terms under which you both are willing to cooperate and thus avoid workplace disputes and future lawsuits.