As a small business owner, you might feel that employment contracts are unnecessary, especially if you’re just working with a contractor or remote assistant. However, there are certain legal responsibilities beyond payroll taxes that come along when you hire someone (albeit for a short period of time) to help you. If you’re working with or planning to hire full-time or part-time employees without the appropriate business contracts, then you’re opening your business up to legal red tape and hefty financial losses, especially if things go south. With the right employment contracts in place, you can use the global workforce to your advantage in 2022.
Where can I find contracts? How do you structure an employment contract? We knew these questions were coming. Here’s a guide to the different types of small business employment contracts — and where to go if you need help drafting them.
What Is an Employment Contract?
An employment contract or contract of employment is a legal agreement between an employer (you) and an employee that covers all the terms and conditions related to employment. It's one of the most important and common small business contracts.
A well-written employment contract will generally include:
Today, thanks to technology, your small business can benefit from a global and agile workforce. Yes, you can successfully run your business with the help of a virtual assistant in Indonesia and alongside a hybrid team member who might enjoy working out of coffees shops. However, this also implies that a general employment contract can't be used everywhere. The rise of remote employees has changed the work landscape and it’s crucial to alter employment contracts to reflect the new working conditions. Here’s a brief guide on some relevant employment contracts.
The most common employment contract is one for a full-time employee. This is used when you hire a person for a long-term basis and are in direct supervision of their work and compensation. Full-time employees typically work between 30 to 40 hours and are provided benefits (medical, retirement, etc.). If you, as an employer, fail to provide the proper amount of compensation for the work or time put in, your employee could pursue legal action. Outlining all details regarding expectations, remuneration, confidentiality clauses and post-employment behavior (such as a non-compete) and termination period in this contract will help mitigate any risks.
In 2020, work from home became the new normal, but now that COVID-19 vaccines are widely available, many companies are urging employees to come back to the offices and split their time between the two. This hybrid working policy is addressed under hybrid contracts. This contract should set clear expectations on when an employee needs to report physically to work — will there be a fixed schedule like 3 days from home and 2 days in office? What would be the attendance protocol if there are training programs or team meetings that are scheduled on the days the person is not expected to be in office? How long will the hybrid policy last? A hybrid employment contract will answer these questions.
Freelance/Independent Contractor Agreements
If you’re considering hiring a freelancer, consultant or contractor (electrician, tax consultant, delivery guy), then an Independent Contractor/Consulting Agreement can serve as a fruitful basis for collaboration. It’ll ensure everyone is on the same page when it comes to the services expected, payment terms, timeline and detail of the project/task to be performed. The document should also specify the course of dispute resolution. What will happen if one of the parties breaches the contract and which state/country laws will apply in those cases? This is crucial if the freelance/contract worker resides in a different state or country.
A fixed-term contract, much like its name, is for hiring a person for a specific duration; fixed-term contracts are frequently used in retail or project settings where sales/holiday season or specific project tasks require additional help or specialists. A fixed-term contract will expire by a predetermined end date. While in the U.S. there are no legal provisions for the duration of fixed-term contracts, this isn’t the case internationally. Requirements of fixed-term contracts vary around the world, so it’s best to work with a legal specialist or lawyer if you are considering hiring an international person.
Drafting a Contract: Doing It the Right Way
Legal terminology is tricky, and a poorly drafted contract could lead your financials into the red. So, how do you structure an employment contract? Instead of trying to structure a contract from ground zero or hiring an attorney (which can be expensive), you can use employment contract templates to get started.
Where do you find contracts? Incfile’s Business Contract Library gives you access to all business legal documents at a fraction of the cost of hiring an attorney on your own. These templates are drafted by legal attorneys or contract specialists and you can customize the details as per your needs. You can be sure you're including everything you need to in each contract you use for your business. Some of the templates included are:
Independent Contractor Agreement
Intellectual Property Assignment Agreement
Employment Offer Letter
Signed, Sealed, Delivered — Why Contracts Matter
Employment contracts are important because they protect you and your employees, set clear expectations about the work and form a legal relationship between your business and its workers. Also, as your business grows or changes, a contract will ensure a certain level of performance from your team (regardless of whether they are remote or on-site). Writing contracts can be daunting, but with a little bit of help from a small business expert or contract library, you can easily set the right contracts in place for a flourishing 2022.
Your business means the world to you; it means the world to us too. Let Incfile help you protect your world. Incfile’s Business Contract Library is a one-stop shop for all employment and business contracts. Our contract templates are easy to use and customize; each contract has been drafted by a team of legal specialists, so you can rest assured that all your legal bases are covered.
Swara Ahluwalia is a freelance content writer with experience in the technical, B2B and SaaS domain. She also has curated content for various lifestyle brands. In her downtime, you will most likely find Swara training for her next marathon or spending time with her two daughters.