Common mistakes when drafting Employment Contracts .... (and how to avoid them)

A clear employment contract can provide a common understanding between you and your employee and ensures misunderstandings are infrequent or non-existent!  Employment disputes waste time and money, especially when they can be easily prevented.

But drafting a good agreement can be hard…and confusing! It is easy to make mistakes when drafting employment contracts which can lead to costly and time consuming disputes. Here are the common mistakes when drafting Employment Agreements and how to avoid them.

COMMON MISTAKES WHEN DRAFTING EMPLOYMENT AGREEMENTS

1.            Re-using an employment contract from a prior to exisiting employee

Using another employee’s contract often leads to errors or mistakes.  Clauses are often missed if they were not provided to the original employee, or you may accidentally commit to clauses or benefits you had not intended to.  An employment contract template (with all clauses which may apply to any scenario in the business to be removed or included as needed) should be created and any contract should be drafted from the template to reduce the risk of missed or additional clauses.  In a worse-case scenario, you may accidentally disclose the personal information of another employee! 

2.            Saving over an employment contract template

The employment contract template is key to an accurate and complete contact.  It is very easy to accidentally save over a template, so you should have measures in place to protect the original template.  Such as saving the document as an actual Template (so it cannot be amended unless the user selects “Save As”) or saving a master copy with specific document version control and management.

3.            Making commitments which aren’t adhered to

This may seem obvious, but it is a common pitfall for employers to overcommit in their employment contract.  You may commit to a very specific disciplinary process which may not be followed or become dated, provide a benefit as ongoing when it was only meant to be temporary, commit to an annual performance review which may not ever occur.  An employment agreement should only commit the parties to the terms which are deliverable (for the entirety of the employment relationship).

4.            Adding (or removing) clauses in the employment contract template

Adding to a contract template without reviewing the entire document can lead to contradictory or confusing clauses.  References may change, or the new clause may invalidate another clause within the contract.  It is important to always read the employment contract in its entirety when adding or removing clauses.

5.            Not obtaining advice on an employment contract template or new clauses

Legislation is changing and before entering into an agreement, advice on the terms should always be sought.  Employment legislation is no different.  You should not write their own employment contract templates, or add individual clauses, without seeking advice.  The clause (or worse – the contract!) could be deemed invalid.  Legal documents shouldn’t be open to interpretation.  Obtaining advice on amendments to contracts to ensure what you intend is legally represented will save future disputes (and significant costs).

6.            Not updating current employees contracts

When legislation changes, employment contracts should also be updated.  An employment relationship may also change over time.  The employee may receive additional benefits, lose benefits, change roles or have the relationship differ from the initial agreement.  You may also wish to change the way you operate, or the terms of the relationship.  Sometimes these terms should be reflected in the employment agreement.  You should take advantage of opportunities such as role changes or salary increases to review and update the employment contract.  You should also undertake an exercise (at least) every five (5) years to consult with and recontract employees who have contracts older than five (5) years.

The drafting of employment contracts is a complex and important task which has long-standing impact on the employee / employer relationship. It is often the first official document received by a new employee and as such it can set the tone for the ongoing working relationship and sets important expectations for both parties.

 Remember:  a well drafted employment contract can reduce cost and time!  It can be problematic to amend or add additional contractual clauses at a later stage, so it is important to ensure your employment contracts are fit for purpose and right first time!

 Need more information?  Check out these resources:

·         THE 10 MINIMUM CLAUSES YOU MUST HAVE IN YOUR EMPLOYMENT AGREEMENTS LEGALLY

·         18 ADDITIONAL CLAUSES YOU SHOULD INCLUDE IN YOUR EMPLOYMENT CONTRACTS TO PROTECT YOUR BUSINESS

·         CORE HR’S ULTIMATE GUIDE TO: NZ EMPLOYMENT CONTRACTS

  Need help? Sign up (https://www.corehr.co.nz/ec-review-specialoffer) or book a free 15 minute consultation here:  BOOK HERE