Employment contract is a type of document which specifies the terms of an individual's employment. It also states the salary and benefits he is going to receive from the company in exchange of his good work performance.

In general, the law does not require you to make an employment contract. However, there are instances when it is the advisable thing to do. For example, you should ask a highly skilled employee to sign a contract if you are planning to employ him for several months or at least a year.

Here are the advantages of having an employment contract:

  • Enables you to keep important employees- Although all your employees are needed in the company, a few of them are considered as "key employees." The expertise of these people is essential to your company's success so you should do everything that you can in order to keep them.

You cannot force them to continue working in the company, but they should inform you about their plans of resigning at least 30 days before their intended resignation date. This 30-day period will allow you to find and train a suitable replacement for them.

  • Protects trade secrets- If you are running a restaurant that uses a secret ingredient or a company that develops high-tech gadgets, you will likely need an employment contract to protect your trade secrets. An employee will be prohibited from disclosing trade secrets from outside parties, especially your rivals, once he signs it.
  • Prevents an employee from competing with your business when he leaves the company- The employment contract may contain a non-compete clause, which will prohibit the worker from being employed in a rival company for a certain period of time if he resigns or once his employment contract ends.

A non-compete clause not only helps you retain highly skilled employees, but also protects the company's client lists and trade secrets. If you disclosed trade secrets to an employee, it is natural that you would want to prevent him from using the information for the success of your rivals.

  • Enables you to easily fire your employees- You can use the employment contract to specify the responsibilities of your employees and the different grounds for their termination. You will be able to terminate employees who failed to comply with the employment standards that you have included in the contract without being sued in court.

Problems may still arise even if there is an employment contract. If this situation happens, you should protect your rights and the company's interests by acquiring the legal help of an employment law attorney.