Why Every Employee Should Have an Employment Contract

Recently a local business owner who runs a small marketing agency told me during a meeting, “I’ve never used written contracts. Just a handshake and mutual respect.”

But then he added, “One of my team recently questioned their hours and entitlements. I had nothing to refer back to and it started to get a bit messy.”

Unfortunately, this happens more often than you’d think. And it’s exactly why having a clear, written employment contract in place for every employee whether casual, part-time or full-time, is one of the smartest things you can do for your business, no matter how small your team is.

And if things do happen to go pear shaped, it really can be worth it's weight in gold.

What Is an Employment Contract Really For?

An employment contract is your go-to guide for how the working relationship should run. It sets clear expectations for both you and your employee, covering not just pay and hours, but also how things operate day-to-day, and what happens if something goes wrong.

A good employment contract should include:

• Job title and responsibilities

• Start date, hours of work, and location

• Pay, allowances, and entitlements

• Leave provisions (annual, sick, etc)

• Notice periods and termination process

• Confidentiality, intellectual property, and post-employment obligations

Without this in writing, you’re relying on handshake agreements and memory. That might work in the early days, but as your business grows, the risks grow with it. A contract gives you clarity and protection.

If there are ever performance issues with an employee, or claims about working hours or entitlements, our first question will always be, "What does their contract say?"

What Can Go Wrong Without One?

You might think, “It’s all good, we’ve known each other for years” or “We’ll figure it out if something comes up.”

But when things go sideways, not having a written agreement can cause real problems:

• Misunderstandings turn into disputes - You remember the agreement one way, your employee remembers it another, and suddenly you’re stuck in a messy disagreement.

• You’re legally exposed - If a complaint ends up with Fair Work, a verbal agreement won’t hold much weight. Without a written contract, it’s your word against theirs.

• Entitlements get missed - Many employers unintentionally underpay leave, overtime, or allowances simply because the details weren’t clearly documented.

• Underperformance is harder to manage - If you haven’t defined the role and expectations, it’s harder to address poor performance in a fair and consistent way.

A written employment contract gives you something solid to fall back on before a small issue turn into a bigger one.

Common Myths About Employment Contracts (And Why They’re Risky)

1. “It’s just casual work, so I don’t need a contract.”

   Casual employees are still entitled to things like minimum pay rates, penalties, and conversion rights. Without a clear agreement, misunderstandings (and underpayments) are almost guaranteed.

   
   

2. “We’re a family business, everyone’s on the same page.”

   Until you’re not. Things change, especially when money, roles, or tough conversations are involved. A contract protects relationships and keeps things professional, even when it’s personal.

   
   

3. “I've got a template here that I found online a couple of years ago, it’s fine.”

   Laws change. Awards update. And what works for one business could be totally wrong for yours. Outdated or mismatched contracts can leave you wide open to legal and compliance issues.

   A quick example - a local hospitality business we worked with recently had one sentence about Time Off In Lieu entitlements in an employees contract. That single sentence ended up costing the business rather a lot (thousands) when things turned south and they agreed to part ways.

   
   

The Upside of Doing It Properly

Having a proper employment contract isn’t just about protecting your business. It actually helps things run smoother and builds a stronger team.

Here’s what it gives you:

• Clarity and confidence: You’ll always have something to refer to when questions come up. No more second-guessing or awkward chats.

• It sets a professional tone: A written agreement shows you run a well-organised business that takes people and compliance seriously.

• A fair and consistent approach: If performance becomes an issue, you’ve got clear expectations to refer back to, and a solid starting point for coaching or action.

• Stronger trust: Contracts are there to provide certainty. Most employees feel more secure having an agreement in black and white and knowing where they stand.

Small Contract Additions That Make a Big Difference

These simple additions can save you stress down the track:

• Include a basic position description: It doesn’t have to be complex, just a clear outline of key duties. It makes performance conversations much easier later on.

• Add a flexibility clause: A well-worded clause allows you to reasonably adjust duties or work location with notice. It gives you room to move as the business evolves.

• Attach the right Fair Work Information Statement(s): You’re legally required to give new employees a copy of the Fair Work Information Statement, and the Casual Employment Information Statement if they’re casual. Include this with the contract to tick that box straight away.

• Review contracts every 1–2 years: Businesses evolve, and what worked for a team of 2 might not work for a team of 10. A quick review helps keep things relevant and compliant.

  
  

  
  

Where to Start If You Don’t Have Contracts Yet

Most businesses only think about contracts when something goes wrong. The best time to fix it is before that happens.

Here’s how to get started:

• Ditch the generic templates: Get a contract tailored to your business, your award, and your team. One-size-fits-all won’t protect you properly.

• Roll it out with new hires first: It’s easier to start fresh with new employees, then update contracts for existing staff once you’re confident with the process.

• Walk them through it: A short chat to explain the key points goes a long way. It helps your team understand it’s about clarity and fairness, not legal fine print.

• Keep signed copies on file: Ideally digital, but paper is fine so long as each agreement is signed and stored securely.

Need Help Getting This Sorted?

If you’re reading this thinking, “I really should get onto this…” but you don’t know where to start, that’s exactly what we’re here for.

We work with small business owners to set up solid, plain-English employment contracts that actually fit your business. No generic templates, just clear, compliant documents.

You’ll also get step-by-step support to roll them out the right way, and periodic reminders throughout your employees probation period, to make sure you're covered and everything is on track.

Book a free discovery call today, and let’s take employment contracts off your 'to-do' list, so you can focus on growing your business.

Get in Touch

Need help? Contact us today - sandra@hrconsultingtas.com.au or 0408 408 225  

DISCLAIMER:

The content provided on this website serves as a general information resource on the subjects discussed, and should not be considered tailored to specific individual circumstances or a replacement for legal counsel. While we exert significant effort to ensure the accuracy of our information, HR Consulting TAS cannot ensure that all content on this website is consistently accurate, exhaustive, or current. Recommendations by HR Consulting TAS and any information acquired from this website should not be regarded as legal advice.