Employment Contract Templates

An Employment Contract (or employment agreement) is a legally binding agreement between an employer and employee that defines compensation, duration, benefits, and other conditions of the employment relationship. It outlines the rights and responsibilities of both parties during the employee’s tenure.

Employment Contracts By State

Employment Contracts By Types (10)

There are various types of employment contracts to accommodate the different employment statuses of individuals:

Employment Contract Sample

The standard employment contract sample below defines all necessary terms of an employment relationship — terms that become legally binding when signed by the employer and employee.

You can also download our free template in PDF or Word format and fill it out independently.

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Table of Contents

• Employment Contracts By State
• Employment Contracts By Types (10)
• Employment Contract Sample
• What is an Employment Contract?
• What Does an Employment Contract Include?
• Standard Clauses in Employment Contracts
• How to Hire an Employee
• How To Write an Employment Contract
• Frequently Asked Questions

What is an Employment Contract?

An employment contract recognizes a legal business relationship between an employer and an employee. The employment contract outlines the rights and responsibilities of both parties for the duration of employment.

For example, the functions an employee will perform and the wages the employer agrees to pay in return.

Before issuing an Employment Agreement, you should request that the candidate provide an Employment Verification Letter to verify their income and employment history.

What Does an Employment Contract Include?

An employment contract will identify the following essential elements:

• Employee Details: Identifying information for the employee, including address, phone number, email address, and any other demographic information.
• Responsibilities: Title and description of employee’s role/s and day-to-day responsibilities.
• Compensation: Amount paid per hour, week, or month, including overtime, bonus(es), commission, and the compensation schedule.
• Start Date: When the employee will start working for the employer.
• Duration of Employment: An amount of time how long an employee agrees to work. In some cases, it might be indefinite; in others, an employee might be expected to perform a fixed amount of time. For example, you may have all new employees sign a 1-year employment contract with an option for extension upon review.
• Benefits: Details about disability protection, health insurance, vacation, sick days, paid time off (PTO), maternity leave, and other benefits.
• Probationary Period: The employee is essentially “on trial” and may be terminated if deemed unsuitable.
• Termination: The reasons why the employment relationship may be ended.
• Work for Hire Clause: Anything created by the employee at work belongs to the company.
• Data Protection: This will give the rules and procedures regarding the company’s data privacy policies. The employer must ensure they abide by the government’s Privacy Act. Confidentiality: Similar to data protection sections, confidentiality sections cover how the employer plans to safeguard any employee information.

Documenting clear expectations, job responsibilities, and employment agreements allows employers to discipline and fire employees who do not meet work performance standards.

An employment contract offers legal protection to both an employee and an employer. If a dispute arises, both parties can refer to the original terms agreed to at the beginning of the working relationship.

By drafting an employment contract today, avoid mistreatment and legal repercussions for both parties.

Standard Clauses in Employment Contracts

You may want to include additional clauses to help protect business interests:

• Confidentiality: A non-disclosure agreement or confidentiality agreement specifies that trade secrets, client lists, and sensitive information cannot be shared while working for this employer or future employers.
• Non-compete: A non-compete agreement prohibits the employee from working for competing companies or competing with the employer if they leave, including misusing confidential information.
• Non-solicitation: Employees may not recruit other co-workers to join them when they leave the company. Furthermore, the employee cannot ask the company’s clients or customers to follow them to their new company. However, if you live in California, Montana, North Dakota, and Oklahoma, restrictive covenants are not allowed, and employees are allowed to work for competitors.

IRS Requirements

If you’re a US company hiring citizens and residents, there are IRS requirements you need to follow:

• IRS Form W-4 – To be completed by employees at the start of employment.
• IRS Form W-9 – To be completed by independent contractors at the start of employment (if more than $600 is to be paid for services or labor).

How to Hire an Employee

The best way to hire an employee is to follow these simple steps:

Step 1 – Place a Job Listing

Make an employment posting that details your expectations of the individual and the job’s compensation. In some states, you must disclose the pay range in job postings due to pay transparency laws. Also, include an Equal Opportunity Statement in your job posting to encourage applicants from diverse backgrounds to apply.

You have several options for posting job listings. Many employers use online job sites like LinkedIn, Indeed, CareerBuilder, or Monster. Recruiters also can assist with finding eligible candidates for any vacant roles in your company. Maximize visibility by sharing your job listing on social media.

Step 2 – Review Applications

Filter through the received job applications, setting aside the ones that meet the job’s essential requirements. To narrow down the pool, you can run applications through AI tools. Data extraction programs scan resumes to search for specific keywords. The program can eliminate applicants who don’t have the experience or education required for the role.

Step 3 – Start the Interview Process

Set up interviews with the top candidates. You need to know the person behind the application and whether they will fit your company well. A phone chat works best for an initial interview to review the job’s basics. Avoid wasting your and the applicant’s time if the salary and expectations don’t work for either party.

If any phone interviews go well, you can move on to a formal interview in person or via video chat. Come up with a list of questions that touch upon:

• Accomplishments
• Career goals
• Hard and soft skills
• Strengths and weaknesses

Step 4 – Check References and Run a Background Check

Checking references is a great way to verify applicants and gain additional insights into their work experience and qualifications. Background checks alert you to past criminal issues that could affect the person’s candidacy. You also want to confirm that the person is legally eligible to work in the United States. An I-9 form will verify employee eligibility.

Step 5 – Prepare an Offer Letter

Once you’ve chosen the perfect candidate, send them an employment offer letter. The employment offer letter typically states:

• Job Duties
• Pay rate
• Benefits
• Time-off
• Disclosures such as NDA or Non-Compete

Based on the inclusions, the candidate may wish to negotiate terms before agreeing.

Minimum Wage

Most states have created and enforced laws that exceed the federal minimum wage under the Fair Labor Standards Act (FSLA).

Step 6 – Notify Rejected Candidates

Send an employment rejection letter to inform unsuccessful applicants of the bad news respectfully. Not all employers offer the courtesy, but it’s good practice to notify other candidates as soon as possible you don’t plan to move forward.

Step 7 – Complete and Sign the Employment Contract

Once you and the candidate have discussed the terms, you can present the employment contract. When the contract is signed, you may want a notary public present for top-level positions.

How To Write an Employment Contract

Here’s a step-by-step to writing an employment contract:

Step 1 – Initial Details

a) List the date this agreement is being made.

b) Provide the full name of the employee and the full name of the company or individual employing the employee.

c) Provide the employee’s job title or position.

d) Choose whether the employee will be employed part-time or full-time.

e) Describe the job duties the employee will be responsible for.

Step 2 – Term and Probationary Period

a) Choose whether the employment will be fixed, at will, or probationary:

• Fixed term if there is a specific end date to the agreement and employment.
• At will, unless there is no end date to the agreement, so unless otherwise stated, either party can terminate the contract without notice.

b) Choose whether or not there will be a trial period where an employee may be released if they cannot meet the job requirements. This typically lasts for three to six months.

Step 3 – Compensation

a) List the employee’s salary here and how the payment will accumulate.

b) Check the frequency at which the employee’s salary will be paid.

Step 4 – Overtime and Additional Compensation

a) If the employee will receive overtime compensation, choose this option and list how much will be paid and describe what frequency constitutes overtime.

b) Choose this option if the employee will not receive overtime pay. Be sure to check federal and state laws to determine whether or not overtime is mandatory in your situation.

c) Choose this option and explain any commission received for services rendered under this agreement.

d) Choose this option and explain any other commissions received for services rendered under this agreement.

Step 5 – Expenses and Work Location

a) Check if the employer will reimburse an employee for the expense(s).

b) Check all expenses that the employer will reimburse the employee for.

c) List the full address where the employee will perform their duties under this agreement.

d) List the required work days and hours.

Step 6 – Time Off

a) This option lists specific paid time off days allowed.

b) Choose this option to default to state and local law requirements for paid time off.

c) This option lists a certain number of paid sick days allowed.

d) Choose this option if the employee is not provided any sick leave.

e) This option lists a certain number of paid personal days allowed.

f) Choose this option if employees are not provided paid personal leave days.

g) List any other benefits provided.

h) Check if there is an employee handbook to refer to that will provide additional information about the employer’s leave policy.

Step 7 – Disability

a) List how many days that employee cannot perform their duties that constitute consideration for disability benefits.

b) Specify the amount of compensation due to the employee.

Step 8 – Non-Compete and Confidentiality

a) Initial here if you want to include this clause. Otherwise, cross it out.

b) Choose if the non-compete will remain in force for the entirety of the employment agreement and will end when the agreement is terminated or if the non-compete will stay in power beyond the termination of employment and list how many months it will remain in force beyond termination.

c) Check which activities are prohibited by the non-compete.

d) Choose this option if the employee is not exposed to sensitive information unknown to the general public.

e) Choose this option if the employee can access competitively sensitive information unknown to the general public.

Step 9 – Termination

a) Choose this if the employer can terminate the employment without cause.

b) Check if notice by the employer to the employee is required and list how many days’ notice is required.

c) Choose this option if the employee may terminate this agreement at any time but with written notice. List how many days’ notice is required.

d) Choose this option if the employee can terminate this employment agreement anytime and for any reason.

Step 10 – Severance

a) Choose this if the employee will be entitled to severance if terminated for reasons other than cause.

b) Choose this option if the employee is not entitled to severance after termination.

c) Check all applicable documents that set forth the rights and obligations of the parties.

Step 11 – Miscellaneous

a) List the state laws governing this agreement.

b) Choose this if litigation is a dispute resolution option and list the state where the dispute will be resolved.

c) Choose this if parties agree that the prevailing party will be entitled to recover its expenses incurred with any action taken regarding this agreement.

d) Choose arbitration if disputes will be resolved by a neutral third party selected by the parties, who evaluate the argument and determine a settlement. The decision by the arbitrator is final and binding.

e) Choose mediation if disputes will be resolved by using a mediator, a neutral third party selected by the parties who try to facilitate a compromise and agreement. The decision by the mediator is non-binding.

f) Choose this option if you wish to mediate first, and then if a resolution is not found, the arbitration will be pursued.

Employment Contract Example

The employment agreement example below details an agreement between the employer, Susan C Clarke, and the employee, Rudolph M Hettinger. Susan C Clarke agrees to employ Rudolph M Hettinger as a Personal Assistant.

This sample letter of agreement between employer and employee Susan C Clarke and Rodolph M Hettinger will become legally binding once both parties sign.

Note: You should use an Independent Contractor Agreement if hiring a business or self-employed person to accomplish a short-term project or task.

Read More: Independent Contractor vs. Employee

Frequently Asked Questions