Employment Contracts — What Should Be Included

An employment contract is a written agreement between an employer and employee setting out the terms and conditions of employment. An employment contract can also be in the form of a letter of offer.

While verbal agreements regarding the employment relationship can be legally binding, these can be problematic if there is a dispute concerning the terms and conditions of employment. This is why it is highly advisable to record the terms and conditions of employment in writing.

Prior to drafting an employment contract there are three important matters that need to be considered.

Firstly, the National Employment Standards (‘NES’) of the Fair Work Act 2009 (Cth) (‘FW Act’) provide minimum employment entitlements for employees in the national workplace relations system. It is not possible to provide conditions that are less than or purport to override the NES. The minimum entitlements of the NES are as follows:

Secondly, there are modern awards that set out minimum pay and conditions of employment. These can have industry or occupational coverage. There may also be an enterprise agreement that applies to the employer and the employees.

While modern awards and enterprise agreements are separate from an employment contract, an employment contract cannot provide less than or purport to override an applicable modern award or enterprise agreement. On that basis, it is important to be aware of the terms and conditions of employment in an applicable modern award or enterprise agreement.

Thirdly, rules introduced on 6 December 2023 under the FW Act restrict the use of fixed term contracts and require employers to give employees engaged on a new fixed term contract a Fixed Term Contract Information Statement. A fixed term contract is a contract that terminates at the end of an identifiable period.

An employer that wishes to employ an employee on a fixed term contract needs to determine whether it is allowed under the FW Act and if so, comply with the fixed term contract requirements.

While there are a range of terms and conditions that can be covered by an employment contract, some of the main terms and conditions are as follows:

Parties: The legal name of the employer and the name of the employee should be clearly stated. It is not appropriate to merely state the employer’s trading name (eg. Smith’s Takeaway) as it is the legal entity that is the employer (eg. XYZ Pty Ltd).

Employment Status: Whether the employment is full-time, part-time or casual. If full-time, whether it will be a salaried position.

Job Title: The name of the position should be clearly stated. It is also advisable to attach a job description outlining the duties and responsibilities.

Applicable Modern Award/Enterprise Agreement: If there is an applicable modern award or enterprise agreement then it is appropriate to refer to it as well as the applicable job classification level.

Start Date: The first day of employment should be stated to show when the employee is required to commence work. This is important for the payment of wages or salary, probationary period and leave accrual.

Pay and Conditions: The wage or salary to be paid, payment frequency, superannuation contributions and any other allowances or benefits.

Leave Entitlements: There can be a reference to the NES but if there are more beneficial leave entitlements then these can also be stated in the employment contract. However, some employers set out more beneficial leave entitlements in their policies and procedures and not in the employment contract.

Obligations to the Employer: The primary obligations to the employer can be stated such as following lawful and reasonable directions, acting honestly and in the best interests of the employer, performing duties with reasonable care and skill and adhering to safe systems of work.

Termination Clause: This will outline when and/or how the employment will end. For an indefinite employment contract this will contain a notice clause but for a fixed term contract this will have a specified end date.

Confidentiality and Intellectual Property: This will protect business information such as customer lists, financial details and other information not in the public domain as well as clarify ownership of any intellectual property created during the employment.

Restraint of Trade: This will restrict an employee from working for competitors (non-compete) and poaching employees (or contractors) from their employer (co-worker non-solicitation). (A restraint of trade can also cover confidentiality however, this has already been covered above).

Employers should seek specific advice about having a clause that restrains an employee from working for competitors as this cannot go beyond protecting the employer’s legitimate business interests.

At the time of drafting, the Federal Government released for consultation the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 (Cth). If enacted as proposed, this would:

These restrictions are intended to apply to new employment contracts and employment arrangements or variations made after the commencement of the legislation.

A properly drafted employment contract is essential in order to clarify employment entitlements and maximise legal protection. Careful consideration must be given to the interaction between the NES entitlements of the FW Act and an applicable modern award and/or enterprise agreement. Other considerations include the use of fixed term contracts which have been restricted in recent years by the FW Act.