How to choose the right employment agreement for your business

Just like cars, not all employment agreements are the same. Try telling a Ferrari owner that he could get just as much pleasure driving a Hyundai Lantra. Now that's not to say that the Hyundai Lantra won't get you from A to B, but let's get real - which would you rather drive? Now I am not saying there is anything wrong with the Hyundai Lantra (I drive one) or that all Hyundai Lantra drivers would rather drive a Ferrari (although I would) but whereas a Hyundai Lantra owner probably couldn't afford a Ferrari, every business owner can afford an employment agreement that delivers the driving experience of a Ferrari. The problem is that most business owners don't know that their employment agreement performs like a Hyundai Lantra. So let me explain the difference.

Car vs. driving experience

A Hyundai Lantra will get you from A to B safely. If you maintain it every year, then it will pass its warrant of fitness. It is compliant and it is functional, if not a little boring.

If you download an employment agreement from the Department of Labour website, then providing you do it properly and don't miss any key clauses out, then you will have an agreement which will comply with the law. You certainly will not be fined by a Labour Inspector, which would otherwise be the case if you didn't have any written agreement in place at all. That's because the agreement was drafted with compliance in mind. But it wasn't drafted with your business in mind. That means that no electric windows, ABS or traction control or any of the other added extras which you may need for your business and which the Ferrari uses to deliver the ultimate driving experience. For example, are there intellectual property clauses suitable to protect the intellectual property in your business? Does the agreement specifically provide what standards you expect from your employees in your business? Does it make it easier or harder for you when it comes to carrying out a dismissal process? The answer is probably that the agreement doesn't make things better for you, which leads me to my next point.

Who was the agreement built for?

I have reviewed numerous employment agreements in my time and I am amazed how many agreements contain clauses which are drafted from an employee's perspective. I am not talking about agreements which have been negotiated with an employee but template agreements which the employee uses every time they employ someone.

No, I am not suggesting an employment agreement should never include clauses drafted in the employee's favour because obviously you will want to entice good employees to your business. However, the key areas of an employment agreement which an employee is concerned about are:

1. Pay and benefits;

2. Hours of work;

3. Restraints of trade.

From the employee's perspective, everything else is window dressing. In my experience, they don't really care about what process will occur in the event of disciplinary action because they don't expect to end up in disciplinary action. So why go to great lengths in the employment agreement to set out in some detail the process of meetings and consultation you will go through if that occurs. Typically, you see examples of this type of clause in a agreements drafted by lawyers - I call it the overdesigned agreement.

The overdesigned agreement

I call it the overdesigned agreement because it says too much of the wrong thing and not enough of the right thing. Grantd, the law requires that a process be carried out before any dismissal takes place. However, in simple terms the law says that the process is not about painting by numbers but ensuring that in overall terms the process carried out with the employee was fair. However, as soon as you embody a process into a written agreement you have written it in stone and you have lost the benefit of flexibility which the law provides. To give an example, if you have set out in some detail that in every case a written warnings process must be carried out, you limit your ability to proceed straight from a verbal warning to a final written warning if the circumstances of the case justify it. To give another example, to say that a certain type of misconduct is always "non serious" ignores that there may be circumstances when that type of conduct could very well be serious. You see, each case is different and if you try and cover every type of case in the employment agreement then you limit yourself when the time comes. Your best option is to only say what you need to and say nothing more.

What you should put in an employment agreement?

So, what should your employment agreement contain? There are only three types of clauses:

1. Clauses which are drafted in your favour to protect your business or set standards by which the employee must work;

2. Clauses required by law;

3. Clauses which you want to include to attract good employees to your business

Everything else is superfluous and you should put the red pen through such clauses. Unfortunately, many agreements I see are either only drafted with compliance in mind or are overdesigned. The Ferrari on the other hand is about delivering the best possible driving experience. If it doesn't contribute to the best driving experience then that feature is not included. Your employment agreement should be about delivering the best agreement to protect your business and attract the right employees into your business. And the best bit is that you don't need to pay an arm and a leg to get one of these agreements, you just have to find the right person to draft it.

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