Employment Contracts: Pros and Cons
An employee contract is a written document you and your employee both sign that defines the terms of your business relationship. There are some situations in which your company will benefit by having signed contracts with your employees.
Advantages of using employment contracts.
- An employment contract allows you to list details and requirements that are specific to your business.
For example, if you are in a business in which your list of clients is highly sensitive or if you have a trade secret such a special recipe, an employee contract can protect your business interests. A non-compete clause in an employee contract will limit that person’s ability to compete with you within a defined period and/or within a defined geographic area.
2.Both parties will have a written document to refer to in the event of a disagreement or dispute.
Once you have found the right person for the job, you want to keep him or her if you can. Finding and training new staff is time-consuming and expensive. By requiring a signed employment contract that specifies a term of employment, you don’t have to worry that the employee will be with you until something better comes along. You can be assured he or she has a commitment to your company.
- An employment contract can help you have some control over how your employees work out in the position.
By laying out the employee standards in a contract, you have grounds for disciplinary measures or even dismissal, if necessary.
- An employment contract promote the professionalism, clarity and sense of organization.
A contract gives your employees a sense of security and even stability. They do not have to worry about what they are getting into with this position. It is all clearly laid out.
Disadvantages of using employment contracts.
- The main disadvantage of an employment contract is that it is a contract.
By its very nature, a contract connotes lack of flexibility and therefore limits the amount of negotiation either party can do.
To set a salary in writing or a proposed schedule for salary review can be problematic for employers. A previously written time-frame does not allow for economic downturns, for instance.
- Employment contracts is that most of them use the legal terminology requiring you to act according to the “covenant of good faith and fair dealing.”
- Major change in company’s needs.
What if your company seems to be going in a different direction than you planned and you discover that you have no need of the project for which you hired someone? According to the contract, you cannot fire that employee. Instead you will need to renegotiate the contract or come to a settlement with the employee.
Employment contracts have both benefits and limitations. Think carefully about the specific needs of your company and weigh the advantages with the disadvantages. If your business has some special or unique circumstances, it is a good idea to talk with an attorney before drafting an employee contract.
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