Many employers use contracts with employees to protect their business interests and their trade secrets. Yet, more than that is at stake with these agreements. Employee contracts also protect the value of your business if you want to sell it in the future.
Often called an employee agreement, an employment contract is a formal declaration that details the relationship between employers and employees. Typically, employers execute the agreements for a period of time such as one to five years, or they make the agreement’s lifespan indefinite.
Advantageously, the employee contract helps you control employee actions during their tenure with your company because the documents clarify employee roles, responsibilities, and duties. You can also use employee agreements to enforce confidentiality, to prevent high turnover, to prevent competition, and to protect intellectual property.
Yet, you must remember that employee agreements legally bind business owners, too. If you agree to certain bonuses, revenue sharing, or compensation plans, then you must be prepared to uphold your side of the bargain.
So just what should you include in employee contracts? What provisions do you need to protect your business from potential harm? What do you need to clarify when employees begin work for you?
Here are key items I recommend including in your agreements with your employees:
Obviously, you want to contact your business advisors and attorney as you draft and implement employee agreements to make sure your interests are protected. Depending on your unique situation, you may need to add more provisions to your employment agreements or include fewer provisions.
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Now, just because you have employment contacts doesn’t mean that employees are always going to abide by them. Yet, employee contacts do tend to protect you if a conflict arises and ends in litigation or mediation.
Employee contacts also protect one other thing…the value of your business. If you are hoping to sell your business at some point in the future, the last thing the buyer wants to do is lose all of your all-star employees the second he purchases your company. The buyer will want key employees to stay for cohesion and continuity. Therefore, you want your employee contacts in place, whether you plan to sell your company tomorrow or 10 years down the road.