When assisting a small business owner with an employee issue or termination, I will usually ask to see the employee’s contract More often than not, I get that deer in the headlights look, followed by the confession that there is absolutely nothing in writing. The fact is, many small business owners don’t feel they need to have a formal contract with their employees — but many live to regret it. Here is why you need an employment contract: 

To say, “Welcome to the company!

Employee contracts do not have to be cumbersome legal documents. Often, my recommendation for small business owners is a simple “offer letter” that doubles as an employment contract. Make it personal and welcome the employee to the company, while simultaneously confirming their position title and start date, and painting the picture of what it is like to work for your company.Set clear expectations Managing people is all about managing expectations, and the best way to do this is to simply write it down. Assuming a potential employee will know your office hours, vacation policy, and benefit plan is a big stretch. How can you expect people to obtain this pertinent information if it isn’t in writing somewhere?For example, I recently had someone tell me a horror story that was completely avoidable — and it resulted in her resignation. She unknowingly showed up late for work at 8:30am, when she should have been by 8am. She then proceeded to take an hour for lunch, when the precedent was for employees to only take 30 minutes. At the end of her first day, she was embarrassed. By the end of her first week, she realized there was no way she would be able to accommodate the 8am start time, and had to give up her new job. Discussing and documenting this type of requirement in an employment contract can often mitigate those awkward surprises, and help businesses to avoid unnecessary turnover and its related expenses. Employment contracts also serve to protect the employees, to ensure any promises (such as regular raises over time) have been documented and approved. Prepare to say “Goodbye”It sounds crazy to think about the employee leaving before they even start, but smart business owners will do just that. It is difficult to get employees to agree to post-employment policies after they have been hired, so you really only get one shot at this. Include a “termination clause” that limits your obligation upon termination, and consider including confidentiality, non-compete, and non-solicit clauses as well. Because let’s face it — all employment relationships come to end at some point, and you will be in better shape if you are prepared.Remember that employment contracts and offer letters are legal agreements, so be sure to ask for help from your lawyer or Human Resources Consultant.

Investing in some expert advice upfront can save you BIG in the long-run.

Sarah Mullins is the founder of uptreeHR, a Halifax based human resource consulting firm that is passionate about helping business owners manage their people, set clear expectations, and increase performance. We truly believe you can treat your employees well, create an amazing culture, and not break the bank. To book a complimentary 30 minute consult with Sarah, click here.
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