Terms of employment: Overview, definition, and example
What are terms of employment?
Terms of employment refer to the agreed-upon conditions and obligations governing the relationship between an employer and an employee. These terms outline key details such as the employee’s role, responsibilities, compensation, work hours, benefits, leave entitlements, termination conditions, and other workplace policies. Terms of employment are often included in employment contracts or offer letters to establish clarity and mutual understanding.
For example, the terms of employment for a marketing manager might specify their salary, working hours, paid leave entitlements, and job responsibilities.
Why are terms of employment important?
Terms of employment are important because they provide a clear framework for the employment relationship, protecting the rights of both the employer and the employee. For SMBs, well-defined terms of employment help prevent disputes, ensure compliance with labor laws, and foster a positive work environment.
By including detailed terms of employment in contracts, businesses can set clear expectations for job performance, workplace behavior, and employee benefits, creating a foundation for trust and accountability.
Understanding terms of employment through an example
Imagine an SMB hires a customer service representative. The terms of employment outlined in the offer letter include:
- A monthly salary of $3,000.
- Working hours from 9 a.m. to 5 p.m., Monday through Friday.
- 15 days of paid vacation per year.
- A three-month probationary period during which performance will be reviewed.
In another scenario, a tech startup hires a software engineer. The terms of employment specify that the engineer will work remotely, be entitled to equity in the company, and can take flexible working hours as long as deadlines are met. These terms ensure that both the startup and the engineer understand their respective rights and obligations.
An example of a terms of employment clause
Here’s how a terms of employment clause might appear in an employment contract:
“The Employee shall be employed as [Insert Job Title] and shall perform the duties and responsibilities set forth in Schedule A of this Agreement. The Employee shall work [Insert Working Hours] per week and shall receive a salary of [Insert Amount], payable on a [Insert Frequency, e.g., bi-weekly] basis. The Employee is entitled to [Insert Benefits, e.g., paid vacation, health insurance] and shall comply with all company policies and procedures. Either Party may terminate this Agreement by providing [Insert Notice Period] written notice in accordance with the termination provisions outlined in Section [Insert Reference].”
Conclusion
Terms of employment establish the foundation of the employer-employee relationship, ensuring that both parties understand their roles, responsibilities, and entitlements. For SMBs, clearly defined terms promote transparency, compliance, and a productive workplace culture. Including these terms in employment contracts protects both parties and minimizes the risk of misunderstandings or disputes, fostering a positive and legally compliant working relationship.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.