What to Include in an Employment Contract

Terms of Employment

Contracts between employers and employees are standard procedure for most businesses. In fact, they’re vital to making sure employees know their responsibilities while also holding employers to their legal obligations. In the event of a dispute, the employment contract becomes a point of reference for both parties moving forward.

Because of this, it’s important to make sure your employment contracts cover the important details of your relationship with your personnel. In this article, we’ll discuss some of the key items you need to include in an employment agreement.

Important Terms to Include in an Employment Contract

Following are some of the most important terms to include in an employment contract. Note that this list is not comprehensive, but rather focuses on major areas that can help minimize your company’s liability.

Employee Classification

One of the key items to include is employee classification. Whether you classify a new hire as an employee or a contractor has significant ramifications for matters like taxes and insurance. For instance, in Illinois, employers must carry workers’ compensation insurance for their employees. Contractors, on the other hand, are not covered by Illinois workers’ compensation law. As such, disputes over workers’ comp may hinge on the worker’s classification.

Job Description and Performance Evaluation

The job description is also important. Employees need to be aware of their responsibilities as well as how they’ll be evaluated in fulfilling them. Without these details, disputes may arise further down the line, particularly if you end up needing to let that employee go.

Compensation Details

Naturally, compensation details are important as well. Wages or salaries, benefits, overtime, paid holidays, and other matters should all be clearly outlined in your agreement. Including these details can prevent confusion and head off potential disputes.


Disputes over termination can also be averted by clear terms in your employment contract. Outline what is required to terminate your employment relationship as well as any requirements or severance pay that may be involved.


Your trade secrets and confidential data are important assets, and you must keep them well protected. A confidentiality agreement between you and your employees helps keep sensitive data secure. In the event that a breach does occur, you’ll be better equipped to recover damages that may result.

Noncompete Clause

A noncompete clause may also be in order, especially when it comes to retaining talent and preventing employees from joining your main competitors. These agreements can also help protect trade secrets to some extent. Keep in mind, however, that non-competes need to be restricted to clear boundaries in order to be enforceable.

Time Off

Time off for holidays, sick leave, or vacations are all important parts of any employment agreement. Outline what time off will be paid as well as the requirements for requesting leave.


Finally, a severability clause is vital to any contract with multiple terms. Severability means if one part of your contract turns out to be unenforceable, it doesn’t invalidate the entire agreement, which can be vital in the event of a dispute.

Drafting Effective Employment Contracts

Drafting an effective employment contract requires keen legal acumen, so you need to involve a legal expert in putting it together. To make sure your employment agreements are fully enforceable, contact an attorney.

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