Best Practices for Employment Contracts

Copy of employment contract on a desk

Best Practices for Employment Contracts

When hiring a new member to the team, it is easy to get caught up in all the excitement and overlook the necessity of creating an employment contract. An employment contract is usually entered into between an employer and executives, physicians, engineers, or other highly skilled employees. Employment contracts are essential to protect your company and create secure, legal agreements. 

So, what should be included in employment contracts to ensure everyone has a clear understanding of their employment? Follow this employment contract template for your next hire.

Scope of Employment

The first thing you want to include in your employment contract is what the job entails. This includes the employee’s job title, responsibilities, and location of employment. If specific terms have been negotiated between the employer and employee, they will be mentioned here. For example, how many hours the employee can work from home a week or goals to be reached in a certain time frame. 


Compensation terms need to be clearly stated, especially when the employee is being compensated by bonus pay or commission on top of base salary. The employment contract should also include conditions that need to be met for raises or bonuses.

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Health benefits such as health insurance or life insurance, 401k or other investment plans, stock options, and signing bonuses are additional key factors to include in the contract. You should also address time off, vacation, and sick day policies. For example, employment contracts should cover how time off is accrued and the number of vacation days employees can take per year, including sick leave.

Termination Conditions

Employment contracts are typically terminated upon some violation of the agreement between the employer and employee. In other cases, the agreement may have a set term of employment, meaning there is a set date where employment ends. The employment contract should also state what the employee or employer can do that will result in termination. For instance, can employees be fired if they commit a felony or misdemeanors such as theft or embezzlement? Or can the employee terminate the contract with the employer if the company violates any rules of the agreement or files for bankruptcy? Additionally, the contract should state terms of severance for wrongful termination. 

Confidentiality and Privacy

The employment agreement should include what the employer and employee can disclose to the public. Confidentiality agreements and non-compete agreements require additional signatures that may be project-specific and prevent the employee from working with a competitor. You might also want to include terms on what employees can say about the company on social media. 

Are you an employer searching for help to draft an employment contract in Canada? Contact Castle HR to ramp up the onboarding process and protect your company!

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