Employment Contracts

An employment contract is an agreement between an employer and an employee. Such a contract can be in writing or based on a simple conversation, but the agreement should at least establish the basic terms and conditions of employment. This article looks at the legal framework for employment contracts in Australia.

Minimum entitlements

While employers and employees can enter into employment contracts, certain conditions are implicit regardless of the parties’ intentions. All employees in the national workplace relations system are covered by the Fair Work Act 2009, and its National Employment Standards (NES) (although not all clauses apply to casual employees). All employment contracts incorporate the NES as minimum entitlements. As a result, terms in an employment contract are invalid if they provide less than the legal minimum entitlements established by the NES or applicable awards, enterprise agreements or other registered agreements.

Some employment contracts, such as those for senior staff members, differ in important ways from standard employment formats. As most executives receive remuneration packages that limit their protections under the Fair Work Act, these contracts do not automatically include the same minimum protections. Executive employment contracts also usually impose constraints (such as non-disclosure or other restraint clauses) on senior employees because of their access to confidential information.

Standard terms and conditions

Employment contracts should be specifically tailored to each organisation’s needs. However, most will include the same basic structure and key sections.

Title and nature of the role

The contract should outline key aspects of the role, reporting lines, and any supervisory responsibilities.

Period of employment

Employment contracts can be permanent or fixed-term. Fixed-term contracts should have clear termination clauses and renewal terms. A fixed-term contract terminates at the end of a specified period, such as on a set date or after a set period of time. Employers must follow specific rules when offering fixed-term contracts, and must give the employee a Fixed Term Contract Information Statement. 

Remuneration

The contract must specify the employee’s pay, including non-cash benefits. The agreement should also confirm the rate of payable superannuation contributions, as well as optional salary sacrifice arrangements. There are new rules against enforcing contractual pay secrecy in Australia. From June 2023, it is unlawful for an employer to include a pay secrecy clause in an employment contract prohibiting an employee from disclosing their remuneration package to someone else, or asking another person about their remuneration.

Leave entitlements

Leave entitlements are governed by the NES. Full-time permanent employees are entitled to four weeks of annual leave, accruing monthly, with part-time employees receiving pro-rata leave. Casual employees do not receive annual leave and instead receive casual loading. Full-time permanent employees are entitled to 10 days of personal leave annually, covering sick and carer’s leave. Employers can require a medical certificate for these absences, especially if they are frequent. Employees can take up to two days of compassionate leave per event for the serious illness or death of an immediate family or household member. Eligible employees can take up to 52 weeks of unpaid parental leave. Amendments to the Fair Work Act allow for flexible leave within the first two months of a child’s birth and access to leave in cases of stillbirth or infant death. These minimums cannot be compromised, but a contract can provide more generous leave provisions than the amount specified by law.

Long service leave

Australian law protects employees’ entitlement to long service leave, but the specific rules about the leave differ based on the jurisdiction. For instance, in Queensland, employees are entitled to 8.6667 weeks of long service leave after 10 years of service. Employees with more than seven but less than 10 years of service may receive pro-rata leave if terminated for specific reasons.

Termination

Employment contracts can end either with notice, or summarily for serious breaches. Notice periods vary based on the length of service, and the NES prescribes minimum notice periods that employers must give to terminated workers. Employees over 45 years of age with at least two years of service receive an additional week of notice beyond their calculated entitlement.

Confidentiality

Most contracts include a clause that requires an employee to act in good faith and not use the employer’s information to benefit competitors or themselves post-employment.

Post-contractual restraints

Employers may impose restraints on former employees to protect the organisation’s legitimate business interests. These restraints must be reasonable and not solely aimed at preventing competition. It is recommended for employers to seek legal advice before inserting restraint clauses in an employment contract.

Employment relationships in Australia are governed by a combination of modern awards, enterprise agreements, the NES, and private contracts. It is crucial to clearly outline roles, responsibilities, remuneration, and leave entitlements in employment contracts. Additionally, an employment contract is an opportunity to clarify the rules around termination, confidentiality, and post-contractual restraints, to ensure fair and lawful employment practices. The employment law team at Go To Court can provide advice about employment contracts in Australia. Contact our team or call 1300 636 846 for assistance.