When launching a new business, the setup work includes understanding laws and regulations, contracts and agreements.

One of the first documents you need is a well-drafted employee contract to ensure a good employer-employee relationship and protect your business.

Define job description

Provide your prospective employee with a clear description of the position he or she expects to fill. Include the job name, the duties, the place of employment and the work hours.

Outline performance goals

The employment contract should contain the performance objectives you expect the new employee to meet, such as production goals. If the prospective employee is taking a sales position, you can include company expectations concerning sales volume as well as new client recruitment goals.

Describe compensation

In the compensation section of the contract, you must define what method of payment the company will offer for this particular position: a salary, an hourly wage or a commission. Include the figures for the salary or hourly wage. If it is a commission, explain draws. Include your overtime policy. Describe how the company handles expense accounts.

Include employee benefits

Some prospective employees are more interested in company benefits than they are in salaries. However, as a new business, you probably cannot complete with mega-corporation benefits. You must, however, provide the basics, such as giving the employee time off to vote or serve on jury duty, the availability of workers’ compensation and compliance with state and federal tax requirements. You may offer benefits such as healthcare and retirement plans and paid vacation time, although you are not required to do so.

Termination

You must also include termination information. Be specific about severance terms whether the employee should be terminated with or without cause.

About contract wording

Use clear, simple language to avoid any misunderstandings about meaning or intent. Professional assistance in drafting or reviewing the employment contract will help you avoid anything that could leave your business unprotected from a legal point of view and cause problems that would undermine the employer-employee relationship.