Get employment contracts right from the get go

Public news

Navigating on-boarding of new employees and regulations surrounding employment contracts can be time consuming, confusing and hard to get right, particularly when you need to keep your business activities moving.

However, there have been a number of businesses without accurate employment contracts in place popping up in the media for underpayment claims, unfair dismissals and more. It pays to be on the front foot.

“Recent underpayments by a large supermarket chain are a classic example.” advised Chris Morey, MTA’s Workplace Relations Manager. “In this particular case, the supermarket chain had salaried managers in their stores, who had certain fixed full time hours. A strategic decision was made at a senior management level to change how those managers worked their hours, including hours that would be classified under the relevant award as overtime or penalty rates.

But no one discussed this with either HR or Payroll, and contracts were not updated! And the annualised salary was insufficient to cover the hours worked including the overtime and penalty rates.”

“Many businesses simply have no form of written employment contract at all, which often proves a problem when underpayment claims are made. If they do have an employment contract, they are often missing important provisions, such as a set-off clause, or just have basic details wrong. When they do decide to implement them, it can be difficult to get existing staff to agree to sign a new employment contract.

“Other key mistakes are getting the details wrong, such as incorrectly setting out leave provisions, or not including key information or provisions, such as confidentiality. If businesses do not get proper advice, or work from a template prepared by an expert in the area, then they may simply not realise they have things wrong or not realise what they need to include. One of the biggest issues is businesses using generic templates not specific for industry found online, which can be full of mistakes.

“The most common outcome if businesses get employment contracts wrong will be either an underpayment claim directly from the employee (often via a lawyer or Union), which will run through either the Federal Circuit Court or the South Australian Employment Tribunal, or an investigation and possible prosecution by the Fair Work Ombudsman. However, if you get superannuation wrong, you may be dealing with the Australian Tax Office, and if you get long service leave wrong, you may be dealing with SafeWork SA.

“If businesses do not have written contracts in place with existing staff, or need to update contracts, businesses can offer new contracts to existing employees. However, these contracts cannot reduce any of the employee’s existing rights (including salary), unless they expressly agree to such change, and the employee can refuse to sign the new contract without any penalty to their existing employment, and remain under the terms of their existing employment.

“Businesses can avoid most issues by making sure they have a good recruitment and on-boarding process for new employees, and engaging expert assistance in drafting a correct and comprehensive employment contract, which is then regularly reviewed and updated as the law changes. Even with a good template, if it is not used correctly during the commencement of the employee, then businesses can still encounter issues.

“The MTA provides training sessions on employment contracts and payroll, as well as template employment contracts on our member website. Members can also contact the WR team for advice or assistance, including in drafting employment contracts. If a dispute arises, a claim is made, or an investigation commenced by a regulator, the WR team can also assist in negotiating and advocating on the member’s behalf.”

Chris Morey has been a Workplace Relations lawyer for over twenty years and has a wealth of experience representing businesses in court.

If you do not have correct contracts in place or if those you have are deficient, book in for our next Employment Contract Essentials training on Wednesday 16th September by clicking here.

For Membership enquiries to receive support from our Workplace Relations’ team and more contact 8291 2000 or