What Clauses Should Always Appear in an Employment Contract?

Updated: May 21

Employment contracts should contain clauses that are fair and legally compliant. As a business, you should seek to include clauses in your employment contracts that are favourable to your business and provide protection.


In Australia, employment contracts must meet the minimum requirements set out in National Employment Standards (and any relevant Modern Awards). It’s also important for the benefit of your business to make sure you include a few fundamental clauses in your employment contracts.


In this article, you'll hear from a workplace lawyer about what clauses should be included in employment contracts.


Prosper Law

Author: Farrah Motley, Legal Principal of Prosper Law.


Employment Lawyer

This article outlines some business-friendly clauses which you should set out in your employment contracts.

1. Intellectual Property

It's important to ensure that your business owns any intellectual property rights your employee might create or contribute to during the course of their employment.


Without an appropriate intellectual property clause, intellectual property may automatically be owned by your employee, not your business.


An intellectual property clause should be prepared by an employment law firm that understands copyright, trademark and other intellectual property laws.

2. Set-off

If a Modern Award applies, it's important to include a set-off clause in your employment contract. If drafted properly, a set-off clause will entitle your business to apply entitlements (other than superannuation) against the employee's annualised salary. This set-off clause will only work to the extent the employee is paid over and above the Award rate and entitlements that are owing.


If you don’t include a set-off clause in your employment contract, your business may be required to pay particular Award entitlements in addition to the annualised salary. If you underpay your employees or fail to properly pay their entitlements, you may be faced with fines or other penalties.

3. Company Policies

If you have or are in the process of creating company policies, make sure the employment contract requires the employee to comply with the business’s policies.


However, be careful to ensure that those policies are not incorporated into the contract. Otherwise, you will need to engage a workplace lawyer to amend the employment contract each time you update your policies.


Employment Lawyer

4. Termination Rights

The employment contract should set out all the ways in which the employment relationship can be terminated, including for serious misconduct.


You should ensure the termination clause is as detailed and broad as possible. If something goes wrong during the employment, you want to make sure you can terminate the employment relationship and minimise the impact on your business.

5. Probation Period

An employment contract should address the probationary period. An employment probationary period is a period within which an employer can terminate an employment contract for any reason (except where there is discrimination).


Although a claim for unfair dismissal cannot be brought until an employee has been employed for at least six months (think of it like a statutory probation period), they may still raise a general protections claim if they are terminated during the probationary period.


You want to make sure you have a broad right to terminate the employment contract, for any reason, during the first six months.


6. Non compete clause


A non compete clause can be an important clause to include in an employment contract, particularly for employees in senior roles.


When employees have access to a business's confidential information, trade secrets, customer lists and financial information, there may be a risk that they will use that information to:

  • start a competing business; and

  • poach their employer's clients.

A non compete clause needs to be carefully worded so that it is legally enforceable. A workplace lawyer can draft a non compete clause in a way that is enforceable and protects the employer.


Workplace Lawyers

Having said all that; employment contracts don’t need to be lengthy, intimidating documents that no one looks at. It’s important to start the employment relationship off on the right foot and to do this you may want to consider framing the employment contract in a friendly ‘letter’ format.


The welcome letter can take front-and-centre, and those all-important, carefully worded terms and conditions can take their place as an attachment.


How can Prosper Law help?


Prosper Law is an Australian employment law firm. We provide legal advice to both employers and employees about their legal rights and obligations.


If you need legal advice about an employment law matter, contact the team at Prosper Law today and find out how we can help you.



Author: Farrah Motley | Legal Principal

PROSPER LAW - A Law Firm for Businesses

M: 0422 721 121

E: farrah@prosperlaw.com.au

W: www.prosperlaw.com.au

A: Suite No. 99, Level 54, One One One Eagle Street, Brisbane, Queensland, Australia


Prosper Law



54 views0 comments