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Startup Hires: 5 Things Every Employment Agreement Needs

Here are five key elements that can help you customize your company’s employee agreement.


Hiring new employees can be exciting and stressful at the same time, so spelling out the responsibilities and compensation past the interview process is very important to a quality relationship with new hires.

Providing new employees with a concrete employment agreement will help hash out your company’s legal terms and regulations beyond the information discussed in the interview process.

An employment agreement is a signed legal contract between your company and the employee. Every company is different but many companies only provide employment agreements for key employee positions. It is a great idea to have an agreement for all employees in case you run into disagreements or future dilemmas. The terms and conditions of the employment agreement should mirror the statues, qualifications, bylaws, and any shareholder agreements of your business.

Here are five key elements that can help you customize your company’s employee agreement:

1. Basic Information

An employee agreement should always include the date executed, date of employee hire, the full name and position title of the employee, and his or her employers address.

2. Job Responsibilities Overview

In this section, you should write a detailed description of the employee’s full job duties and responsibilities while in the employ of your company. This is the section where any specifics on hours, reporting to a designated place of work, and any office related regulations should be hashed out.

Include the name and job title of the specific person to whom the employee will report with questions or concerns. It is important to clearly spell out all potential employee responsibilities that may arise over time so that if the particular employee doesn’t work out, you will have in writing what was expected of him or her.

3. Compensation

It is very important to be detailed in this section. Include whether you are paying the employee a salary or hourly wage and if there are possible commissions or bonus programs. State how often the person will be paid and when employee reviews will be conducted.

If an employee can earn income in additional ways, clearly define those details in this section. Explain how the commission and bonus programs will be calculated and included in paychecks so the employee is clear on how he or she will be paid. Also, include details on how the employee may receive a pay raise depending on your company regulations. Details about any cost of living increase should be included in this section.

4. Benefits

A comprehensive overview of benefits should be included in this section. Health insurance, vacation time, personal days, sick days, and retirement plans constitute benefits, as well as any other perks for working at your company.

Offer a detailed explanation of when and how employees become eligible for certain benefits and what the employee’s and company’s monetary contributions to these specific benefits are. Details about health insurance and retirement plans will be offered by the specific provider in an informational packet, so do not include that information in this section.

5. Termination

This section should provide a detailed explanation of certain circumstances in which an employee can be terminated and what the termination procedure includes. Outline specific written and verbal warning systems and your company’s termination policy. Include your responsibilities as well as your employee’s responsibilities if the specific person isn’t meeting your requirements stated in the job duties section of the agreement.

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Photo: Vanishing Elephant

E.J. Dealy is CEO of The Company Corporation, which provides affordable incorporation services to small businesses and entrepreneurs nationwide, including Delaware, Florida, and California. The Company Corporation does not provide legal, financial, or tax advice.

 

 

 

 

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