Creating an Employment Contract

When you hire employees, having the right paperwork in place matters. An employment contract helps set clear expectations, protects your business, and ensures your employees receive their legal entitlements.

While employment contracts can be verbal, having a written agreement makes it much easier to manage pay, conditions, and responsibilities as your business grows.

What is an Employment Contract?

An employment contract is an agreement between an employer and an employee that sets out the terms and conditions of employment.

It can also be referred to as:

• terms and conditions of employment

• a workplace contract or workplace agreement

An employment contract can be written or verbal, but a written contract provides clarity for both parties and reduces the risk of disputes down the track.

Why it’s a Good Idea to have Employment Contracts in Place?

A clear employment contract can help:

• outline pay, hours, and conditions

• manage expectations about the role

• protect your business through confidentiality and intellectual property clauses

• reduce misunderstandings or disputes

While contracts can’t remove minimum entitlements, they help explain how those entitlements apply in your business.

Employment Contracts, Modern Awards, Enterprise Agreements and the NES

Employment Contracts

• An agreement between an employer and an individual employee

• Sets out the terms and conditions of employment for that role

• Can be written or verbal, though written contracts provide greater clarity

• Must not provide less than an employee’s minimum legal entitlements

National Employment Standards (NES)

• A set of minimum employment entitlements for most employees in Australia

• Cover areas such as hours of work, leave, termination, and flexible work arrangements

• Form the legal foundation of employee entitlements under the Fair Work Act

Modern Awards

• Legal documents made by the Fair Work Commission

• Set minimum pay rates and employment conditions

• Usually apply to specific industries or occupations

• Can apply even when a written employment contract is in place

Enterprise Agreements

• Agreements that apply to a business or group of businesses

• Cover multiple employees

• Approved and registered with the Fair Work Commission

• Set minimum terms and conditions for employees covered by the agreement

Together, these instruments work as a hierarchy of employee protections. The NES provides the base level of entitlements that apply to most employees. Modern awards or enterprise agreements then add industry- or business-specific minimum conditions. An employment contract sits alongside these and explains how those entitlements apply to an individual employee.

While an employer can offer more generous terms in an employment contract, the contract can never reduce or override the minimum entitlements set out in the NES, a modern award, or an enterprise agreement.

Creating an Employment Contract

If you’re hiring staff and need a simple starting point, business.gov.au provides a free employment contract tool.

Go to FREE Employment Contract Tool

The tool helps you create a basic employment contract tailored to your business and compliant with workplace laws. It’s a practical option for small businesses wanting to get the foundations right.

Employment contracts help create clarity, consistency, and confidence for both employers and employees. When set up correctly, they support compliance with workplace laws while protecting your business as it grows.