How To Draft Employment Contract for Founder

Every start-up founder desires their company to expand and make more returns on its investment. Thus, the company would require more employees to ensure the smooth operation of the business as it keeps growing. 

During the hiring process, one of the tried and tested ways of protecting the interests of employers and employees is to create an employment contract. An employment contract is a contractual agreement between an employer and an employee that establishes the responsibilities, rights, and roles of the parties involved. It explains the terms of employment. 

Typically, employment contracts cover the terms and conditions of employment, the capacity in which an employee is hired, and the corresponding job responsibilities. 

Notably, the terms of an employment contract are legally enforceable by both the employer and the employee.

Why do you need an employment contract as a founder?

As a founder, these are some of the benefits of having an employment contract;

1. It makes the employee understand their responsibilities and rights, which in turn, increases their efficiency.
2. It creates a healthy work relationship between the employee and the employer, which plays a role in their relationship with clients.
3. It is legally binding and helps keep employees in check because breaching contract terms has repercussions.
4. It provides the employee with a certain level of job security.
5. An effective employment contract would protect the employer and the business. The employment contract places an obligation that prevents ex-employees from sharing sensitive information like trade secrets with a third party.

Clauses to include in an employment contract

These are standard clauses that should be included when drafting an employment contract. These details are;

1. Names of parties: This is the name of the employer and employee. 
2. Job title and a brief description of the job duties: A contract of employment should include the title of the job and a brief description of the responsibilities to be taken by the employee. 
3. Benefits and compensation: A standard employment contract should include compensation or benefits derivable from employment. This includes incentives, bonuses, benefits, and other compensation options available to the employees. 
4. Non-compete: This clause prevents an employee from entering or starting a similar trade or profession in competition against his employer. 
5. Dispute resolution: A standard employment contract must contain a clause that guides the parties in the event of any disagreement. This clause could state settlement means like arbitration, mediation, negotiation, or even a judicial court. Recently, many employers have preferred to include an arbitration clause in the employment contract as it is more cost-effective and less time-consuming. 
6. Hours of work: This agreement should also include the number of hours an employee is expected to put in daily, weekly or monthly and other options such as working after official hours, working from home, etc. 
7. Vacation: A good employment contract should state the exact number of holidays to be enjoyed by the employee during employment. 
8. Expected duration of the contract: The employment contract should state whether the employee is employed for a continuous or set period. 
9. Termination: The termination clause is crucial in a contract of employment. This clause should contain the acts that may lead to termination and the number of days required to give notice of termination. 
10. Confidentiality clause: An employment contract should include a confidentiality clause that protects the company’s sensitive information, such as trade secrets and client data, from the public. It restricts the employee from disclosing confidential information to any third person without the employer’s permission. This clause assures the business that the hired employees of the company will not expose trade secrets to other competitors in the market.