Importance of Having an Employment Contract in Place

Importance of Having an Employment Contract in Place

A contract signed between an employee and their employer is referred to as employment contract. This contract is essential to safeguard both, the employee and their employer since it binds both of them to perform their jobs and responsibilities in a fair manner. Like, an employment contract lays down the role and jobs of an employee in the company and also binds the employer to renumerate the employee for the work that they are doing.

But an employment contract does more than just this. There are several other benefits of having an employment contract in place which are discussed at length here.

Employment contracts define the term

In most employment contracts, the term of employment is defined. This allows the employees to have a job guarantee with the employer unless they are found violating any terms mentioned in the contract. In case of a violation, the employment contract also allows the employers to terminate the services of an employee at the end of the term if the jurisdiction restricts the organization from firing of employees. The term length is negotiated and decided at the starting to which both parties agree.

Employment contract eliminates ambiguity

Among the main constituents of an employment contract are the duties and jobs of an employee which they are expected to perform for the employer. This reduces ambiguity and allows the employee to understand what they are expected to do everyday at work and what their ultimate goal should be. With the help of employment contract, employers can also have their expectations managed from the employees. They can expect a goal-oriented performance. In case an employee is not able to perform or do what is expected from them, the contract can be a strong basis on which an employer can take an action. Not just this. The employment contract also clearly states how the employer is going to renumerate the employee for their services. The salary, facilities, perks, and other bonuses are clearly mentioned in the contract which the employer has to abide by.

Employment contract is important for the protection of employee rights

An employment contract can help the employees ensure that there is no violation of their rights. The contract is drafted as per the Employment Act which a country follows. Like, in Singapore, the Employment Act entitles employees earning less than SGD 2000 a month to some additional benefits. Therefore, while drafting an employment contract in Singapore, it is important to put all these things into consideration. The contract clearly states the wage of the employee, how often they will be paid, how will they be renumerated for working overtime, and several other guidelines which all employees must stay aware of. This allows the employees to know their rights and make sure that their contract covers everything. Before an employee enters into a contract with an employer, it is also essential that they know about the Employment Act of their area. 

Since it might not be convenient for everyone to understand the legal jargons and technicalities of an Employment Act, you can consult an attorney before signing the contract.