Employment Contract
An employment contract sets out the terms of the employment relationship in a way that is compliant with Australian law and protects both employer and employee.
What is a Employment Contract?
An employment contract is a legally binding agreement between an employer and employee that sets out the terms and conditions of employment, including role, compensation, working hours, leave entitlements, confidentiality obligations, IP ownership, and termination provisions. In Australia, employment contracts operate alongside the Fair Work Act 2009, relevant modern awards, and the National Employment Standards (NES).
The NES establish minimum entitlements that cannot be contracted out of, regardless of what the employment contract says. These include maximum weekly hours, leave entitlements (annual leave, personal leave, parental leave), notice of termination, and redundancy pay. Any employment contract that purports to provide less than the NES minimum is unenforceable to the extent of the inconsistency.
For startups, employment contracts serve an additional purpose beyond legal compliance: they capture IP ownership obligations, confidentiality requirements, and post-employment restrictions (non-competes) that protect the business's core assets as it scales.
When do you need a Employment Contract?
- ✓When hiring your first full-time or part-time employee in Australia
- ✓When bringing on a casual employee who may transition to permanent employment
- ✓When promoting an employee to a significantly different role
- ✓When an employee's terms of engagement need to be updated materially
- ✓When hiring in a specialised technical role where IP and confidentiality terms are critical
- ✓When engaging a senior employee or executive where more detailed governance provisions are needed
Key provisions to include
Position & Duties
Defines the employee's role, reporting structure, and core responsibilities.
Remuneration
Sets base salary, any superannuation (currently 11.5%), and the basis on which it will be reviewed.
Working Hours
Confirms full-time, part-time, or casual status and any flexible or remote work arrangements.
Leave Entitlements
Confirms NES minimum entitlements including 4 weeks annual leave and 10 days personal/carer's leave per year.
Confidentiality
Prohibits disclosure of confidential business information during and after employment.
IP Ownership
Assigns all IP created in the course of employment to the employer, supplementing the default common law position.
Post-Employment Restrictions
Non-compete and non-solicitation clauses with reasonable geographic and time limits.
Termination
Notice periods for employer and employee, and grounds for summary dismissal without notice.
Common mistakes to avoid
Not checking whether the employee is covered by a modern award, which may provide higher minimum entitlements than the contract
Including post-employment non-compete clauses that are broader than necessary — Australian courts will not enforce unreasonable restraints
Failing to include an IP assignment clause, relying solely on the common law position for employer ownership
Not specifying the basis of employment (full-time, part-time, casual) clearly, which affects leave accrual and entitlements
Using a generic template that was not reviewed for compliance with the Fair Work Act and current National Employment Standards
Frequently asked questions
What is the National Employment Standards and how does it affect employment contracts?
The NES are 11 minimum workplace entitlements under the Fair Work Act 2009. They include maximum weekly hours (38 + reasonable additional), flexible working arrangements, leave entitlements, notice of termination, and redundancy pay. An employment contract cannot provide less than the NES minimum. If it does, the NES minimum applies regardless of what the contract says.
Do I need to check if a modern award applies to my employee?
Yes. Modern awards cover most employees in Australia and set minimum rates of pay and conditions for specific industries and occupations. If a modern award applies to your employee, you must pay at least the award rate and provide at least the award conditions, even if the employment contract provides different terms.
Are non-compete clauses enforceable in Australia?
Non-compete clauses are enforceable in Australia, but only to the extent they are reasonable. Australian courts will not enforce a non-compete that is broader than necessary to protect the employer's legitimate business interests. The scope (geographic area, industries covered) and duration must be proportionate to the employee's seniority and access to sensitive information.
What notice period is required for termination in Australia?
Under the Fair Work Act, the minimum notice period for termination ranges from 1 to 4 weeks depending on the employee's period of continuous service. Employees aged over 45 with at least 2 years of continuous service are entitled to an additional week's notice. Employment contracts can provide longer notice periods but not shorter ones.
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