3 reasons your company needs employment contracts

On Behalf of | Nov 26, 2021 | Business Law |

Especially when you first start hiring staff members, you may not recognize the importance of a thorough employment contract. Many growing businesses hiring their first staff members will use an informal system that later puts them at risk. 

While it may seem like a way to save money to just negotiate directly with the worker before hiring them, drafting a specific employment contract will do a lot more to protect your company than a verbal agreement with a worker will. 

Contracts eliminate confusion about your obligations

Workers sometimes have unrealistic expectations regarding compensation, severance or bonuses. They may misunderstand what you say to them in a meeting or an interview and then try to hold you accountable for that miscommunication later. An employment contract will outline exactly what obligations you have to your workers, eliminating confusion and possible legal claims. 

Contacts help protect you from worker misconduct

When an employer works for you, they could make racially inflammatory statements to a co-worker or sexist comments to a customer. Having the right policies in your employment contract lets you take disciplinary action against that worker, possibly including terminating them. 

Your contract can also include protections for after the worker leaves your company, such as restrictive covenants that stop them from misusing information learned at your company. 

Contracts clarify the standards for your workers

Your employment contract can include certain performance expectations or even a code of conduct. Your workers can’t meet your expectations if they don’t know them. By clarifying everything from how you will rate their performance to the dress code they must follow, your employment contract can help your workers do a better job of meeting your expectations. 

Investing in employment contracts can be an intelligent way to protect your business against potential future losses.