Employment Contracts: Why You Need An “Employment Prenup”

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Let’s be honest. Nailing down the details of employment contracts isn’t the most exciting part of growing your team. But from a risk management perspective, the advantage to employers is obvious, since having a contract in place protects you from liability on multiple levels. As an employer, if you don’t have the terms of your employment relationships in writing, your practice becomes your contract through common law, so it’s important to spell it out.

And employers aren’t the only ones who benefit from having a contract in writing. Papering your employment relationship can also have a big effect on employee engagement. Employees want to feel protected, and contracts can help provide that sense of security and stability by leveling the playing field and detailing expectations.

Need a refresher on employment contracts? Here are 4 often-overlooked (but important!) things to keep in mind when negotiating an “Employment Prenup”:

1. Talk about the end at the beginning. Most employment agreements are in the form of short offer letters designed to woo the candidate into accepting the offer. The problem with that approach? The document often leaves out details about the potential end of the employment relationship, and what that will look like. Having an employment contract with a termination clause in place before your new employee starts is kind of like signing an employment prenuptial agreement. You don’t necessarily want to think about what might happen, but it’s smart to protect everybody in case the relationship goes south.

2. Spell out logistics. In practice, a lot of workplaces are flexible with hours, work locations, and overtime agreements. And providing flexibility is great for keeping your employees happy, but you need to first establish the parameters you’re working within. Your employment agreement should specify expected hours of work, work locations, time off entitlements, and incorporate any key employment policies. It’s easy to loosen up on the rules once they’re established, but it’s not so easy to tighten the reigns when you haven’t established what the rules are beforehand.

Having an ‘Employment Prenup’ in place levels the playing field, and protects everybody if things go south.

3. Use them as a reference point. Let’s face it, some work-related conversations can be difficult. Pulling out a document signed by both parties can ease the tension of conversations about job-related conflicts or requests. Referring to a written contract creates a neutral jumping-off point for discussions that might otherwise create conflict. When it’s all there on paper, emotions are less likely to dictate how the conversation goes, and it’s easier to avoid miscommunications and bad feelings.

4. Keep them fresh. Have a current employee who is moving into a new position? It’s time to dig out their agreement and take another look. Having outdated agreements can lead to problems down the road, as gaps in details are replaced with assumptions or misinformation. Update employment contracts regularly, so they accurately reflect any new details of the employment relationship, including changes in job title, wages, work location, and benefits/ vacation entitlements.

Your Engaged Assignment: Time to do some spring cleaning! Dust off your current employment contracts, and compare them to your current policies and practices. Do they say what you need them to? If not, now’s a good time to update your current employees’ contracts, and create a solid template to use for future new employees. 

Rather have us do it? Let us provide a fresh perspective and help identify the gaps in your current employment prenup.