Signing a contract with your newly-hired worker might seem like a formality of the hiring process. However, it is a step that could potentially help protect your business. Rather than just using a basic employment contract template you found online, you may want to draft custom documents.
Thoughtfully drafted, comprehensive employment contracts can decrease the financial risk that your company assumes when hiring a new worker. What are some of the ways that your employment contract could potentially protect your financial interests?
Clarify compensation, benefits and severance issues
One of the most common ways for workers to financially undermine their employer is by bringing a wage claim against them. If an employee feels like they did not receive the compensation their employer promised them, they might litigate.
Often, these claims come from unreasonable expectations or assumptions on the part of the worker. Being very explicit about everything from how often you offer cost-of-living raises to what, if any, compensation a worker receives when they leave the company can reduce your risk of facing a wage claim in the future.
Protect against employees damaging the business when they leave
The more skilled the position that a worker accepts with your company, the greater their potential to cause real harm to your business in the future. An executive or engineer with access to all of your trade secrets or client lists could potentially do massive damage by going to work for a competitor or starting their own business.
Including restrictive covenants like non-compete agreements and non-disclosure agreements in your employment contracts can protect you from this kind of misconduct.
Limit the risks from workers behaving inappropriately
Anyone that you hire could have significant personal biases that affect how they treat others on the job. You may not realize that someone is sexist or racist until one of their coworkers or subordinates brings a claim against them.
Including clear policies against discrimination and harassment in your employment contracts, as well as appropriate ways for workers to report complaints, can reduce the possibility of your business facing a civil lawsuit due to alleged harassment or discrimination on the job.
Understanding your risks as an employer can help you draft contracts that will better protect your company’s interest when you bring in new talent.