13 Steps How To Write A Small Business Employment Contract (Easy)

(doylc.com) How To Write A Small Business Employment Contract - Typically, employees are not required to sign a written contract when you hire them to work for you. However, in some situations you may want to retain a particularly valuable employee and ensure that they stay with you for a period of time. Especially when you're just starting out, getting a small business employment contract for your key employees can give you the stability your business needs in its early years.

• Establishment of the agreement

1. Search for forms or templates. There are numerous websites that offer free employment contract templates. You can also look at employment contracts used by other companies. Compare these templates to create a template that suits your organization's needs.

Keep in mind that a single template rarely fits the needs of your business perfectly. You may have to cobble together several to get the right effect.

If there's a clause or phrase you don't understand, look it up to see what it means before copying verbatim—especially so-called boilerplate clauses. You don't want to ask someone to sign a contract that you don't fully understand yourself.

Look for templates and patterns that are written in plain language, rather than ones filled with confusing and unnecessary legal jargon. The trend in legal documents is towards more concise language that is easy for everyone to understand.

The greatest—and easiest—to borrow from a template is its structure and organization. Use subdivisions and headings that make sense to you and meet the needs of your business.

2. Identify the contracting parties. The introductory clause of your employment contract names the company hiring the worker and gives the full legal name of the person to be hired.

Typically, you provide the full names of the parties, then include a label that will be used in the rest of the document, e.g. B. "employee" for the person you are hiring and "company". yourself and your company.

This allows you to keep the contract and customize it for other employees with minimal changes, rather than having to create a contract from scratch each time.

3. Establish the purpose of the agreement. Most employment contracts, commonly known as “during” clauses, contain a series of provisions that together define why the two parties are entering into a written contract and what they intend to achieve as a result.

You can make these clauses as detailed and verbose as you like, or as short and to the point as you like. Although they are technically part of the contract, they do not contain any legally valid language.

These clauses are often a good place to praise the employee's skills or expertise and explain why you want them for the job. Just be careful not to over-bloat them or they may charge more money or better services.

4. Set the term of the agreement. Your employment contract should state in advance how long it will last and specific dates when it begins and ends. Before setting a final term, check your state's laws to ensure that the term you have agreed upon is legally enforceable.

Some states have laws that limit the number of years an employment contract can last. Check your state's laws before setting a deadline to ensure your contract is within those limits.

If the contract starts from the date of signing, you can simply indicate this. If it begins on a different date, enter that date as the start of the term. Remember that your "date sure" cannot be before signing the contract - it has to be later.

Some contracts also end on a specific date, while others last a specific number of years or months from the date the contract was signed.

The benefit of having the contract start and end on a specific date is that you don't have to check the calendar to find out the exact date the contract ends and whether that date happens to fall on a weekend or holiday.

• Define roles and duties

5. Provide a job description. Provide the specific job title for which you are hiring the employee, and then provide a brief summary of what that position entails and what the employee will do for you, including any duties and responsibilities where possible.

If you are just starting your business, it may be difficult for you to list exactly what this new employee's job responsibilities will entail. Don't worry about getting too specific or trying to include absolutely everything the employee might need to do at work.

Instead, focus on general areas and the primary responsibilities in each area, noting that the employee is expected to do whatever is necessary to ensure the responsibilities are met.

For example, you may have hired someone to direct your marketing and advertising efforts, but you are not entirely sure of the details at this point. The contract may state that the employee is the director of marketing and promotions, then use the phrase "including but not limited to" and rattle off a few things you know you intend to use such as: B. social media, local print advertising, and internet advertising.

The key to a new employment contract is to keep the job description flexible enough to adapt to the needs of your small business. You don't want to run into the problem of having to ask them for something that isn't technically in their job description.

6. Outline the employee's compensation. The compensation clause of your contract must state exactly how much the employee will be paid for their services and at what rate, if applicable. You should also specify the frequency and method of payment.

In this section, you should also state whether the person is considered an employee - meaning you're deducting taxes from their paycheck - or an independent contractor.

If you are hiring the individual as an independent contractor, check the US Department of Labor rules and regulations to make sure they are not counted as an employee despite the fact that you have designated them otherwise.

The US Small Business Administration, found on the web at sba.gov, also has guidelines and information about whether someone qualifies as an independent contractor or an employee.

If the employee's compensation includes sales commissions or bonuses, the contract should detail how those amounts will be paid and when and how the employee can expect those payments.

7. Include a discussion of the benefits. If the employee receives medical, dental or other insurance, retirement benefits, and accrued vacation time (whether paid, unpaid, or both), write a full description of those benefits.

Your discussion of the benefits should include a description of how the premiums will be paid and who is responsible for doing so.

Check with your insurance company if a specific language is required for benefits and registration.

If you offer retirement benefits such as 401(k), the contract should include a description of the plan and the investment entity that manages it.

You may also reference and incorporate by reference other contracts or agreements relating to Services.

For accrued time, the contract should state how these hours are calculated and when the worker can take them. If notice is required, indicate how far in advance the worker must give you notice if they want to take their leave.

Note that statutory services may require a specific language. Check state and local laws or consult an attorney if you have any questions or concerns.

8. Describe the reasons for the termination or extension of the contract. List all of the reasons the employee may be terminated and the procedures required for termination, if any. You may also want to include a discussion of any applicable performance appraisal procedures here.

If you have an employment manual with disciplinary and termination policies and procedures, you may mention it and incorporate it into the contract by reference. Make sure the employee gets a copy of this along with the contract. #*List specific reasons the employee may be fired for "good cause" such as dishonesty or theft.

Depending on your disciplinary procedures and the size of your staff, you may also want to include the option of a probationary period for the first 90 days of the contract or if the employee is being counseled for performance-related issues.

• Protection of your business interests

9. Establish the method for resolving disputes. In this section, you are free to determine how contractual disputes are resolved and which state law applies to the interpretation of the contract.

Disputes under the contract are different from disputes that may arise in the workplace. In general, you want to prevent the employee from filing a breach of contract lawsuit.

Most employment contracts provide for either mediation or arbitration to resolve contractual disputes. Typically, the dispute resolution service to be used is named or it is pointed out that both parties must agree to the selected service in the event of a dispute.

You will also typically want to include a breach notification provision that gives the breaching party a specific time limit, e.g. B. two weeks, to review the other party's complaint and resolve the issue before taking any further action.

Choice of law can be tricky, but typically with a small business you want the law of the state where your business is located to govern the contract. This makes it easier for you to answer a question of interpretation or, if necessary, to look for a lawyer.

10. Protect trade secrets and intellectual property. If the employee is working with your company's intellectual property or trade secrets, such as recipes or customer lists, the employment contract should include a non-disclosure agreement that prohibits the employee from disclosing that information to others.

Some employers prefer to conclude the non-disclosure agreement separately from the employment contract. If you do so, however, you must make additional considerations in order for it to be legally binding.

If the non-disclosure agreement is included in the employment contract, the job offer itself constitutes valid consideration for the entire contract.

Some employers have a separate agreement because they want the non-disclosure agreement to last longer than the employment contract itself. You can achieve the same result by giving the employee severance pay in the event of termination of employment in exchange for signing the non-disclosure agreement.

11. Identify who owns the intellectual property the employee creates. If the employee creates content for you or is working on the development of a new invention, method or program, include a clause in the contract stating that the company owns this intellectual property.

Typically, anything the employee creates as part of their employment is considered commissioned work and becomes the intellectual property of the company.

However, whether something falls within the realm of employment can be open to interpretation, so a strong small business employment contract will define this accurately.

If you're having trouble drawing the line, consider your reaction when you learn the employee created something. If your first thought is something like "Hey, that's mine! You did that for me!”, then you should take this into account in the context of employment.

Scope of employment always includes things that the employee comes up with while working on site or 24/7 – but also things that the employee is working on and developing with operational resources.

Intellectual property that falls within the realm of employment can even include things that the employee creates at home outside of working hours if there is a close connection between their creation and their activity at work.

For example, if you own a software company and the employee is working on an app that locates puppies near the user for him to pet, and the employee goes home and creates an app to find kittens near the user, would have a strong case that you owned the rights to the kitten app.

12. Consider adding a non-compete clause. A non-competition clause, especially if the contract is relatively short, can discourage an employee from acquiring skills and experience from you and then using them unfairly to benefit others.

Non-competition clauses are frowned upon by judges because they restrict trade and worker mobility and are therefore very difficult to enforce.

If you choose to use a non-compete clause, it is imperative that you carefully read your state's laws on the subject.

Keep the time as short as possible to avoid direct competition and keep the geographic location relatively small and close to your company's physical location.

The most important thing to remember about any non-compete clause is that its terms should be reasonable and designed to protect a legitimate business interest.

13. Include various provisions. All contracts contain a number of different standard provisions, also known as “boilerplate”, which protect both parties to the contract and ensure that the contract itself is legally binding and enforceable.

For example, every contract contains a provision stating that if a judge invalidates part of the contract, the invalid clause can be severed and the rest of the contract will continue to apply.

There should also be clauses in which each of you guarantees the other that you have the right and ability to enter into the contract and to perform the obligations described.

Some contracts contain a short paragraph before the signature lines according to the other provisions. However, this is not necessary for the legal validity of the contract.