If you’re starting a new job or hiring your first employee in New South Wales, you might be wondering whether a written employment contract is actually required by law. It’s a common question we hear from both employers and employees, and the answer might surprise you.
The Legal Position on Employment Contracts in NSW
In New South Wales, and more broadly across Australia, there is no strict legal requirement for employment contracts to be in writing. Employment relationships can be formed verbally, in writing, or by conduct. However, certain minimum terms and conditions of employment are governed by the Fair Work Act 2009 (Cth), the National Employment Standards (NES), and relevant modern awards or enterprise agreements.
While a written employment contract is not compulsory, employers are legally required to provide new employees with a Fair Work Information Statement, which outlines key rights and entitlements.
We recommend to employees and employers alike that employment contracts are usually a good idea.
Why Are Employment Contracts a Good Idea?
Clarity and Certainty
Firstly, a written contract clearly sets out the terms and conditions of employment, reducing the risk of misunderstandings or disputes. When everything is documented in plain English, both parties know exactly where they stand from day one.
Tailored Terms for Your Business
Contracts also allow for the inclusion of terms specific to the business or role, such as confidentiality, intellectual property, and post-employment restraints or things like bonus or incentive schemes. These customised provisions protect your business interests while ensuring employees understand their obligations.
What Should Be Included in Employment Contracts?
A well-drafted employment contract typically includes the following:
- Parties to the Contract: Names and details of the employer and employee.
- Position and Duties: Job title, description of duties, and reporting lines.
- Commencement Date and Term: Start date and, if applicable, duration of employment (e.g., fixed-term or ongoing).
- Remuneration and Benefits: Salary or wage, payment frequency, superannuation, and any additional benefits (e.g., bonuses, allowances).
- Hours of Work: Ordinary hours, overtime, and arrangements for flexible work.
- Leave Entitlements: Annual leave, personal/carer’s leave, parental leave, and other statutory or contractual leave.
- Probationary Period: If there’s a probation period applicable, the duration and conditions of any probationary period.
- Termination: Notice periods, grounds for termination, and procedures for resignation or dismissal.
- Confidentiality and Intellectual Property: Obligations regarding confidential information and ownership of intellectual property created during employment.
- Post Employment Restraints: Any applicable non-compete, non-solicitation, and other post-employment restrictions, where appropriate.
- Dispute Resolution: Mechanisms for resolving workplace disputes.
The Hidden Benefit of Employment Contracts
An employment contract also has another great benefit: it’s a talking piece to start a conversation between employee and employer about each party’s expectations to ensure they are on the same page before deciding to work together. This upfront discussion can prevent countless issues down the track and help establish a positive working relationship from the start.
Protect Your Business and Your Rights
Whether you’re an employer looking to protect your business interests or an employee wanting to understand your rights and entitlements, having a properly drafted employment contract makes good business sense. While not legally required, the clarity and protection they provide far outweigh the minimal time and cost involved in getting them right.
Need help drafting or reviewing an employment contract? Our experienced employment law team can ensure your employment arrangements comply with NSW and Commonwealth legislation while protecting your interests. Book a free consultation today to discuss your employment law needs.
