The short answer is no. Employing people without a written employment contract is not only risky, but also illegal in Australia. In this blog post, we will explain why you need an employment contract, what are the consequences of not having one, and how to create one that complies with the law.
What is an employment contract?
An employment contract is a legally binding agreement between an employer and an employee that sets out the terms and conditions of employment, such as duties, hours, pay, leave, benefits, and termination. An employment contract can be written, oral, or implied by conduct. However, it is highly recommended to have a written contract that clearly states the rights and obligations of both parties.
Why do you need an employment contract?
There are many reasons why you need an employment contract, such as:
- To comply with the law. The Fair Work Act 2009 (Cth) requires employers to provide employees with a written statement of their terms and conditions of employment within 14 days of starting work. This statement must include information such as the name of the employer and employee, the type of employment (full-time, part-time, casual, etc.), the rate of pay and how it is calculated, the hours of work and any overtime arrangements, the leave entitlements and how they are accrued, and any other matters that are relevant to the employment relationship.
- To protect your rights and interests. A written employment contract can help you avoid disputes and misunderstandings with your employees by clarifying what is expected from both sides. It can also provide evidence in case of a legal claim or a complaint to the Fair Work Commission or the Fair Work Ombudsman.
- To attract and retain talent. A written employment contract can show your employees that you value them and respect their rights. It can also help you offer competitive terms and conditions that match or exceed the industry standards and the minimum entitlements under the National Employment Standards (NES).
What are the consequences of not having an employment contract?
If you employ people without a written employment contract, you may face serious consequences, such as:
- Breaching the law. You may be liable for civil penalties or criminal prosecution for failing to comply with the Fair Work Act 2009 (Cth) or other relevant legislation. For example, you may be fined up to $63,000 per breach for a corporation or $12,600 per breach for an individual for contravening a modern award or an enterprise agreement.
- Losing your rights and interests. You may have difficulty enforcing your terms and conditions of employment or defending yourself against claims or complaints from your employees. For example, you may not be able to recover unpaid wages or damages for breach of contract if there is no written evidence of the agreement.
- Damaging your reputation and morale. You may lose the trust and loyalty of your employees or potential employees if they perceive that you are not treating them fairly or legally. This may affect your productivity, performance, retention, and recruitment.
How to create an employment contract?
To create an employment contract that complies with the law and protects your rights and interests, you should:
- Consult a lawyer or a human resources professional who can advise you on the legal requirements and best practices for your industry and situation.
- Use a template or a sample contract that covers all the essential elements of an employment contract, such as those provided by the Fair Work Ombudsman or other reputable sources.
- Customize the contract to suit your specific needs and circumstances, such as adding clauses on confidentiality, intellectual property, non-compete, non-solicitation, dispute resolution, etc.
- Review the contract carefully and make sure it is clear, accurate, consistent, and complete.
- Sign the contract with your employee and keep a copy for your records.
Conclusion
Employing people without a written employment contract is not ok in Australia. It is risky, illegal, and detrimental to your business. Therefore, you should always have a written employment contract that complies with the law and protects your rights and interests. If you need help with creating an employment contract, contact us today for a free consultation.