What are contracts and agreements?
Guidelines for using contractual documents
When to use written contracts
Written contracts, awards, agreements
Other conditions
AWAs apply for specified period
Contracts with existing employees
When existing contracts change in noteworthy respects
Employment contracts as opposed to contracts with contractors
Necessary prerequisites before a contract is legally enforceable
The limitations of sample contracts on this website
Restraint clauses not included
Taxation and superannuation
Impact of WorkChoices
What are contracts and agreements?
Contracts and agreements include:
It is vital that your business has appropriate contractual documents in place in relation to your employees and contractors.
This website provides you with an interactive format to create customised individual employment contracts and also to create a customised Australian Workplace Agreement (AWA).
You may also view these documents for comparative purposes, if you already have contractual documents in place.
When you customise any documents on this website you should be aware that you are attempting to compose documents particularly relevant to your business. Contracts have obvious legal consequences so professional legal assistance is advised to confirm your documents are appropriate for their intended use.
When to use written contracts
The main time to consider contracts of employment is when a new employee joins your business. It is also important to put in writing when a noteworthy change occurs in the arrangements between you and your employee during the employment relationship – this will form a new contract of employment.
Written employment contracts are relevant for all employees, even employees who are covered by awards and collective agreements.
Each category of contract on this website commences with some background notes and the question of the suitability of each contract is addressed in these notes.
Written contracts, awards, agreements
If nothing is written down, the law will imply some basic terms – like an employee should provide faithful service in return for money from the employer or that in the absence of an express term of notice of termination.
Other conditions
The other conditions impacting on the employment relationship, such as award provisions and legislation (eg relating to leave etc), exist alongside contractual terms. Awards and collective agreements also provide many and often most of the employment conditions for certain employees.
AWAs apply for specified period
AWAs have a clause providing for an expiry date. Issues requiring adjustment and change should be noted during the course of the AWA and then addressed in the new AWA.
Contracts with existing employees
Existing employees already have contracts of employment with their employers. These may be written or oral or partly written and partly oral.
If an employer of employee wishes to express in writing a contract that is different from the one in existence then the other party must agree to the ‘new’ contract.
A fair process to implement new contracts with existing employees requires what lawyers term ‘consideration’ (‘something of value in the eyes of the law’) and the free agreement of the parties. An example where both conditions would be satisfied is where an employee is promoted to a different position and salary is increased - this circumstance won't warrant setting out the new arrangements in a new written contract.
When existing contracts change in noteworthy respects
Contracts should be reviewed regularly. If significant change takes place, such as the employee relocates or is promoted, then it is prudent to establish a new contract, which takes account of those changes.
Regular review may not produce great change and matters such as increases in salary can be covered in a letter from the employer to the employee.
Employment contracts as opposed to contracts with contractors
A crucial distinction to make is the difference between employees and contractors. Both provide labour but they are treated differently in a legal sense. Be confident that you have correctly categorised the person as an employee or contractor and seek legal advice if in any doubt.
Necessary prerequisites before a contract is legally enforceable
In basic terms for a contract to exist in a legal sense, the following elements should be present:
1. Parties who are legally able to contract – eg be old enough to form a legally binding contract.
2. The subject of the contract should be lawful.
3. The terms of the contract should be understood and agreed by each party.
4. There should be payment promised by the employer/principal to the employee/contractor in return for the employee’s/contractor’s labour.
The limitations of sample contracts on this website
Some employment contracts are very complex involving share schemes and other complex remuneration arrangements. For example, there may be an overseas resident involved and issues relating to the employee's residency may arise. Such complex contracts and arrangements are NOT the subject of this website. The parties to such contracts should have the required level of legal advice.
A complex area of law involves restraint clauses – used by employers to prevent employees who leave their employ from competing in the same area or industry etc for a certain time, in a specific location or locations.
Restraint clauses need to be carefully drafted and if a business is contemplating the use of such clauses then legal advice should be sought.
The sample documents provided on this website are provided in the context of Australia only and should be not be assumed to apply in other contexts or jurisdictions.
Taxation and superannuation
Note: Taxation and superannuation are two large topic areas that overlap the employment relationship. They are not the subject of this website as the contractual and policy issues can vary considerably. In addition, the extensive amount of legislation applying to taxation and superannuation goes beyond the scope of this website.
Impact of WorkChoices
As this new system comes into operation over the next few years, AWAs, workplace contracts and collective agreements will take on a more prominent role, as awards play a lesser role.
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