Here we take a look at what the purpose of an executive employment contract is, and outline the key sections and information that needs to go into an executive employment agreement. We also provide executive employment contract templates, giving you the structure and information you need to create a high-grade executive employment contract.
What is an Executive Employment Agreement?
At its most basic, an executive employment agreement is a legally binding document that defines the terms of employment between the employer and the employee. At the executive level, the contract may be a mutually agreed list of responsibilities and benefits, with the executive playing a role in the contract development process.
An executive is likely to have more say in the terms of their employment, as reflected in the contract, than a more junior employee.
What should be in an executive employment agreement?
As a minimum, the following need to be in your executive employment contract:
- Employer
- Name of executive
- Position
- Start date
- Term
- Benefits
- Confidentiality clause
- Non-solicitation clause
- Non-competition clause
- Probationary period
- Termination terms
- Work for hire clause
- Agency provision
How to Write an Executive Employment Contract
Detailed below are the key pieces of information that need to be in an executive contract. Note that this is not an exhaustive list – depending on the nature of your business and the role the executive wishes to play, there may be additional areas that need to be set out as part of the contractual responsibilities.
1. Employee and Employer Details
The name of the employee (although an executive may not have employee status; they may be freelance or hired as an independent contractor) and the name of the employer, as well as the date the contract becomes effective.
2. List of Responsibilities or Desired Outcomes
Although employees will usually have a job title and a list of responsibilities, executives often have a set of outcomes they are employed to achieve, without a prescriptive list of tasks. Executives are frequently appointed based on their ability to achieve outcomes (for example successfully oversee a merger, improve productivity, or mastermind a change in organizational culture). The way in which they achieve this is often left up to them and doesn’t feature in a contractual agreement.
Unlike most other employees, executives won’t always have a set number of hours or days that they need to work. There may also be a lot of flexibility around the hours they need to be in the office. This is because an executive’s performance is often judged on outcomes rather than hours worked.
3. Compensation (Direct Financial Remuneration)
These might include a basic salary, dividends, and/or bonus payments.
4. Date of Employment Commencement
Duration of Contract – this may be set for a year initially (a probationary period), with a continuation dependent on favorable performance.
5. Executive Benefits (Anything Other than Financial Remuneration)
This could include anything from a company car through to health insurance, relocation allowance childcare vouchers, disability protection, maternity benefits, sick pay, vacation allowance, or other perks such as subsidized meals or a well-being allowance.
When considering executive benefits, it’s important to remember that these people are hired because they are a significant asset to your organization – they are the individuals who should be able to deliver ambitious corporate goals. There won’t be many individuals who can do what a seasoned executive can do. As such, they will demand, and deserve, a significant portfolio of benefits. The benefits an executive will expect are frequently far more than those a more junior employee might hope for.
6. Legal Protections
In employer/employee contracts, legal protections tend to be put in place to protect the employer. For employer/executive contracts, the executive may also request legal protection on a specific matter, perhaps relating to an additional role they fulfill or a pecuniary interest in another company.
Executives are usually highly skilled and experienced experts in their field who have considerable worth. As such, they are in a position to dictate the terms of their employment in a way that wouldn’t be appropriate for a junior employee.
Commonly, an employer will include the following clauses:
- Non-competition – as part of the contract, the executive will agree not to work for a company that competes for your audience. This will also include a confidentiality clause, relating to the use of information specific to your organization that could give competitors a trade advantage if it were known.
- Non-solicitation. If the executive leaves, this clause prevents them from persuading key members of your team to join them in their next venture.
- Confidentiality – the executive will not disclose information that could damage your company or its customers.
7. Grounds for Termination
For an executive, these may relate less to objective variables (such as poor attendance or failure to complete specific tasks) than subjective variables (inability to motivate the management team, or a poor fit with corporate culture).
A time-served executive is unlikely to take up an appointment unless they feel able and willing to give it their very best shot. Executives are usually ambitious self-starters that will simply move elsewhere if they feel they can’t achieve what’s needed.
8. Signatures
To make the document legally binding, both parties need to sign the agreement.
Executive Employment Contract Sample
Download our executive employment agreement pdf for a good example of an executive employment agreement template.
Executive Employment Agreement
