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Debunking major employment contract myths


contract with spilled ink

Advice | Employment Legislation | Managing

By Ben Thompson

Employment contracts are common practice and serve as a written agreement between employer and employee. Surprisingly, many employers still engage employees without any finalised terms of employment. Or, over time, employee responsibilities change and these changes are not incorporated into the agreements that were made, leaving employers open to risk.

Written contracts allow for the terms of employment to be clear and unambiguous ensuring both parties are aware of and understand their responsibilities, duties and obligations under the agreement from the commencement of employment until it is either amended or terminated.

Nevertheless, a number of misunderstandings still surround employment contracts, NES and awards so today we set out to bust some of these myths.

Employment Innovations Solicitor, Amanda Daff, offers employers some valuable advice:

“Unfortunately, some employers believe they can contract out of certain award or NES conditions, simply due to the fact that the employee has agreed in writing via an employment contract. Sadly, all contracts are required to be tailored to both the underpinning legislative framework and parameters of federal minimum standards and the Modern Awards which apply. As a result, it is not uncommon for businesses to require various contract formats according to industry, occupation and status of employment. “

Myth: “There is no employment contract until something is signed.”

An employee “showing up to perform the job” can be equivalent to agreeing to a contract, in other words, a contract does not have to be written down and can exist in the form of a verbal agreement. This means that, in the absence of a written contract, the employer is still required to honour certain employee rights. If there was a letter of offer or correspondence that detailed the job description, this may also stand as an employment contract, as some of the terms of employment may appear here as a result of a verbal agreement before the commencement of employment.

Myth: “If a worker has an ABN they are a contractor, so there is no need for an employment contract.”

Having an ABN does not automatically make someone a contractor, specific steps should be made to determine whether or not the employee is in fact a contractor, firstly by considering the complete working arrangement and the specific terms and conditions under which the work is being performed.

Myth: “The Paid Parental Leave Scheme changes employees’ leave entitlements.”

Any existing leave entitlements, whether via an award, NES or an employment contract, are not affected by the Paid Parental Leave Scheme. If paid maternity or parental leave is already provided through an industrial agreement or law, this cannot be withdrawn for the life of the agreement or law. The scheme is classified as a payment, not a leave entitlement, so it also does not affect any annual leave arrangements or accrual.

Myth: “I can let someone work for me as a free trial and no contract is required.”

There is no such thing as a free trial; whenever anyone works for any business, they must be paid in wages. There is an obligation, as an employer, to ensure any employees are provided with what is appropriate in terms of what they are entitled to under NES and any Modern Award or enterprise agreement that is applicable. 

**Remember, employment contracts, NES and awards all work together to serve the interests of both parties, and when looking at the whole picture, it becomes clear that contracts alone are just the tip of the iceberg when it comes to being an employer.

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