Employment contracts usually have the same clauses and structure. This makes employment contract templates particularly useful. All you really need is a general idea of how to write an employment contract and a good collection of templates that can be modified for the different roles in your company. Then, you’ll be able to customize them for each individual hire.
Since laws differ by state, for example, how at-will employment is defined, you’ll want to use an employment contract template that is customized for your state. Don’t worry, I’ve included links to free employment contract templates for every state plus Washington D.C.
In this article, I go through everything you need to know to write an employment contract. Then, I present a very simple employment contract template to give you an idea of what an employment contract looks like.
After that, I provide links to employment contract templates, along with all related documents, such as non-compete agreements (NCAs) and non-disclosure agreements (NDAs). Next, I go through a comprehensive employment contract, step by step, so you can feel confident in modifying an employment contract template.
At the end of the article, you can find a useful FAQ, detailing everything you need to know about employment contracts.
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What is an employment contract?
An employment contract is sometimes called a “contract of employment” or an “employment agreement”. Simply put, an employment contract is between a company and a worker.
The employment contract details all of the compensation and benefits that the business provides the employee. It also defines the job title, position, and responsibilities of the new hire.
Let’s go over everything you would usually find in an employment contract.
What is included in an employment contract?
Every employment contract is different, but they all have some combination of the following information:
- Salary or wages:
Whether an employee is paid a wage (hourly compensation) or salary (annual compensation) is mentioned. The pay rate is also defined. If there is a schedule of raises, this can also be included.
- Other compensation:
Some employees receive commissions, bonuses, or other financial benefits in addition to their salary. This is also defined.
If an employee gets paid vacation, paternal or bereavement leave, sick days, and so on, then it should also be included in the employment contract. In addition, any pension, employer match on investments (401k), health insurance, etc., should be defined as well.
If an employee is expected to work specific shifts or hours, such as midnight shifts, then this can be included in the employment contract as well.
- Duration of employment:
The start date should be included in every employment contract. For contract workers with a specific end date, this should be included as well. Otherwise, the employment contract can be open-ended with specific dates for when negotiations on pay raises, etc., are open.
- Job title and description:
The title of the job and the employee’s roles and responsibilities should be clearly defined.
Some companies will require employees to sign a non-disclosure agreement (NDA) attesting that they will not discuss private information outside of the company while working at the company and long into the future. Others will use a general non-disclosure clause (NDC) in the employment contract.
- Competition after termination:
Similar to NDAs and NDCs, an employer may require an employee to sign a non-compete agreement (NCA) or include a non-compete clause (NCC) in the employment contract. These limit the employee from pursuing similar work at competing companies after their tenure ends. Note that these need to be limited in scope, geography, and duration to be considered enforceable.
Some contracts will stipulate that any issues must go to arbitration. They will also explain the process, including whether the company will pay for arbitration and/or provide a lawyer to represent the employee.
- Ownership agreement:
If the employee’s role includes making materials of any kind, from patents to code or Twitter posts, then the company may include a clause that says they retain ownership of those materials.
- Termination reasons:
Most employment contracts will include an at-will clause, which means that the employer or employee can terminate a contract without reason. However, they may define different types of termination that provide the employee with different levels of compensation when the contract ends. Note that these clauses do not reduce an employee’s legal rights. An at-will employee still cannot be fired for illegal reasons such as retaliation or discrimination against a protected class.
Do employment contracts need to be written?
An employment contract does not need to be written. If you have a job, then you have an employment contract. If it isn’t in writing, then it is an implied contract of some type. Since employment contracts exist no matter what, it is always valuable to formalize them in writing. Here are some of the different types of employment contracts.
Written employment contracts
Written employment contracts are probably what comes to mind when you think about an employment contract. These are written out and include some or all of the elements discussed above, as well as others that are specific to the role.
Implied employment contracts
Implied contracts are ones that can be inferred to exist based on communications between the employee and the employer. For example, employee manuals, emails, and phone calls during the hiring process, pay stubs, and the employer’s history with other employees can all be used to determine whether an employment contract exists and what it states.
Implied employment contracts often come into play when an employee has been with a company for years and has received several promotions, raises, and job description changes. The company may not update their written employment contract each time the role changes, so the working history of the employee and any communications between them and the company can be considered as revisions to the original contract.
Union labor agreements
Unions negotiate and sign contracts with companies. Their members then sign a collective agreement with the union. These contracts are often very detailed and include pay scales for raises and promotions. They usually also include dates by which collective agreement must be renegotiated.
One clause that is unique to union labor agreements explains grievances. Since union workers have more clearly defined rules, this clause explains how individual members can notify union leaders about violations of the agreement and how union leaders will represent them when bringing these grievances to the company.
While the above contracts are the most commonly seen, there are other special employment contracts for unique working relationships.
Independent contractor agreement: The IRS classifies contractors as 1099 employees. They are individuals who are paid to perform a service. Independent contractors are often called freelancers, and I have an in-depth article dealing with great freelancer employment contract templates.
Subcontractor agreement: This is an agreement between a contractor and a subcontractor. After a contractor signs an agreement with a company to perform some work, they may then outsource part (or all) of the contract to subcontractors. If you are an independent contractor, be sure to confirm whether your employer allows subcontracting first.
Internship agreement: Unpaid or paid interns can have special contracts that limit the scope and duration of their employment.
What are some other contracts employees might need to sign?
I mentioned above two other specific contracts that an employer may have employees sign: NDAs and NCAs.
Non-disclosure agreement (NDA): Employees are often given access to private information, such as codebases, processes, and financial information. If this information were given to competitors or released publicly, it could damage the company. To protect itself, a company will usually require an employee to sign an NDA or have a non-disclosure clause (NDC) in their employment contract.
Non-compete agreement (NCA): NCAs restrict what an employee can do upon terminating their contract with an employer. They are usually signed by upper management and employees with key skills. NCAs and non-compete clauses (NCCs) must be limited in three specific ways to be considered enforceable. Even when limited in the following ways, many jurisdictions are beginning to consider NCAs as unenforceable.
The NCA must limit which companies, industries, and/or positions are restricted.
The NCA must limit where it is enforced, for example a city or state.
The NCA must limit for how long it is enforced, for example, six months or one year.
What are the pros and cons of having a written employment contract?
While there are clear benefits to having a written employment contract, they also have some downsides. Here are some of the pros and cons of having a written employment contract.
The advantages of a written employment contract
Written employment contracts clearly define what the employer and employee get out of the work arrangement. The company gets a worker who will do a specific, defined job. The worker gets a specified salary along with other benefits. This facilitates the relationship.
It also protects both the employer and employee as they have a reference document that defines their relationship. This means a more stable work life for the employee and more stable business processes for the company.
The disadvantages of a written employment contract
While the stability and clarity of a written employment contract are major benefits, they lead to less flexibility. A contract is legally binding, which could be troublesome if the employee or employer wants to change something in the future. Indeed, revising the contract can mean another round of negotiations.
Simple employment contract template
The following is a simple, “bare essentials” employment contract template. Note that you should always consult a lawyer before using a contract and that the following does not constitute not legal advice. For more tips on writing an employment contract, check out this companion post.
Employment contract template example
This employment contract, dated on [date] in the year [year], is entered into by [Company Name] (hereafter, Company) and [Employee Name] (hereafter, Employee) of [City, State]. This document constitutes an employment agreement between these parties and is governed by the laws of [state or district].
IN CONSIDERATION of this employment contract, the Company and the Employee agree to the following terms and conditions:
The Employee agrees to carry out the responsibilities and duties set out in this contract and their job description. The Employee also agrees to comply with all company policies and procedures, as well as any applicable state and/or federal laws.
The Employee is given the job title [job title]. The following are the duties of [job title]: [list all duties related to the job title].
The Employee is to be paid [dollar amount] [per hour/per year] before applicable deductions.
The Company offers the following benefits: [list all benefits]. These benefits begin [immediately/after the probationary period].
5. Paid time off
The Employee is offered the following paid time off after the probationary period: [length of vacation time], [length of sick time], and [length of bereavement time].
The Company and the Employee acknowledge that the Employee’s employment is and shall continue to be at-will, as defined under the applicable law of [state or district]. If the Employee’s employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards, or compensation other than as provided by this Agreement or as may otherwise be established under the Company’s existing employee benefit plans or policies at the time of termination.
Use SignTime to execute and store your employment contracts
With all of the paperwork required, from NDAs and NCAs to employment contracts, it can be difficult to coordinate signatures. It can also be difficult to find and pull a specific agreement to confirm your rights and responsibilities with that employee.
You can even set up your own employment contract template repository as you write new contracts. That way you’ll never have to write another non-disclosure agreement again.
The best employment contract templates
First, you can see that eForms has employment contract templates for every state:
They also offer contracts for different employment types:
You can also find some related agreements:
Next, I’m going to go through their default comprehensive employment agreement in detail so that you feel comfortable modifying it for any role.
What are the essential components to any employment contract template?
Here’s the default employment contract template on eForms with explanations for every editable section. There’s a lot of information in this short document so read it thoroughly before using it!
The top part has the start date, the employer and employee’s names, and some standard legalese to introduce the document.
The first main section includes the job title, job description, and whether it is a full-time or part-time position.