If you own a small business, you may not have ever required an employment contract as most smaller companies often employ family members or friends. However, what happens when your company grows and you consider hiring an unknown candidate for the job? Do you need a written, legal contract before you can extend an offer? What other HR practices should you be putting in place? If you're unsure where to start or how to get started, contact a lawyer in Raleigh, Eldreth Law Firm. They can help you with all of your employment contract needs and provide guidance on other employment best practices so that you can hire smarter moving forward.
With that in mind, today we’ll discuss 3 critical items that every employment contract should include and how you can incorporate them into your small business' hiring process.
Your Employment Contract Should Include Job Information
Before even creating a new position, it's important to clearly define the role, along with what role or responsibilities will be associated with the position. This information is critical because it will not only help your new employee understand what their job entails, but also will help attract the right candidates during the recruitment process.
If writing or following job descriptions aren't currently a practice that your company follows, then your small business lawyer in Raleigh, NC can certainly help. Information you might include as it relates to job information are:
- Job title
- Job description
- Team and/or department assignment (including reporting structure)
- Skill requirements
- Role requirements
- Educational requirements
- Performance measurements
While the process of defining the job can take a considerable amount of time, we find that it's worth the effort, particularly if you intend for the position to be a permanent role within your organization.
Your Employment Contract Should Include Compensation and Benefits
Once you've clearly defined the role, one of the most important factors to include in the employment contract is the compensation and benefits package. Not only will your pay rate and benefits greatly impact the quality of candidates that respond to your job posting, but we find that prospective candidates are particularly interested in knowing what the position will pay fairly early on in the interview process.
The compensation and benefits package should include the following but should be tailored to fit the position.
- Annual salary or hourly rate
- Any raises, bonuses, or incentives applicable
- Health benefits (medical, dental, eye care, etc.)
- Company stock options
- 401k or other investment/retirement plans
- Other fringe benefits
Make sure that all hiring managers are clear on the details of the compensation and benefits package (or can redirect to the appropriate authority) before any candidate receives an offer letter as any misunderstandings could have long-term implications or could affect how long a candidate stays with your business.
What about Paid Time Off, Sick Leave, and Vacations?
Technically, paid time off, sick days, and vacation is considered part of the compensation and benefits package. However, considering that these items are some of the most sought-after benefits potential hires look for, we believe that they should be covered separately within your employment contract.
Paid Time Off (PTO)
Any paid time off described in the employment contract should thoroughly cover if and how time off is accrued, when it can be taken, and what needs to happen for employees to utilize those benefits. For example, in most organizations, sick leave or vacation time can be accrued and is awarded either as an annual lump sum or as part of a given pay period.
When you describe vacation days, make sure that you cover how and when time is available to be taken, what the approval process looks like, as well as how employees should submit vacation time requests.
Oftentimes, we find that the amount of vacation time tends to increase with tenure. If that is the case in your organization, make sure that you include the rate of increase as well as any accrual caps. You'll also want to be clear if there are any blackout periods in which employees would not be able to request vacation time for any reason.
Sick Days, Family Emergencies, and Unpaid Leave
In addition to PTO and vacation days, employees typically want to know what to expect if they or one of their family members gets sick. Be sure to be very specific in your employment agreement if you have any restrictions or policy guidelines surrounding this topic. On the other hand, if employees have an opportunity to make up hours, be sure to also specify how they should do so.
Stay tuned for more critical items that should be included in your employment contract as we continue this conversation in the coming weeks. And if you feel as though you could use some help drafting an employment contract for your small business, don't hesitate to call ELDRETH LAW FIRM | RALEIGH SMALL BUSINESS LAWYER.