Types of employment contracts
Employment contracts in Australia can take different forms. While written contracts are best practice, the employment relationship and its terms can also arise from other sources.
Written contracts
- Clear terms and conditions
- Signed by both parties
- Reduces disputes
- Best practice approach
Other contract forms
- Verbal agreements
- Implied terms from conduct
- Offer letters accepted
- Custom and practice
Essential contract elements
A comprehensive employment contract should include:
Key contract terms
How contracts interact with awards
In Australia, the employment relationship is governed by a hierarchy of instruments. The National Employment Standards and modern awards set minimum conditions that contracts cannot reduce.
- NES floor: 11 minimum standards apply to all employees
- Award minimum: Award rates and conditions as the next layer
- Contract adds: Contracts can provide above-award benefits
- Better of: Employee gets the better of contract vs award for each term
Award coverage still applies
Having a written employment contract does not remove award coverage. Employees covered by a modern award remain entitled to all award conditions. Contracts that purport to exclude award coverage or provide less than award minimums are ineffective for those terms.
Probation periods in contracts
Many employment contracts include a probation period, typically 3-6 months. During this time:
Probation period features
- Assess employee suitability
- Usually shorter notice period
- Regular performance feedback
- All other entitlements apply
Important notes
- Leave still accrues during probation
- Same pay rates apply
- Unfair dismissal rules differ
- Must be specified in contract
Common employment contract mistakes
Rates below award
Including pay rates that fall below the applicable modern award minimum, which makes those terms void and unenforceable.
Excluding NES entitlements
Attempting to contract out of National Employment Standards like annual leave or personal leave, which is not legally permitted.
Unclear terms
Vague or ambiguous contract terms that lead to disputes about what was agreed, particularly around duties, hours, or bonus arrangements.
Key takeaways
Employment contracts define the terms of the employment relationship but cannot reduce minimum entitlements under the NES or applicable awards. Written contracts provide clarity and reduce disputes.
Good onboarding includes clear contracts and setting up employees correctly in your systems. RosterElf's employee management helps capture the details you need to manage staff compliantly from their first day.
