6 Things You Really Need to Know Before You Sign That Employment Contract

Maybe you are starting a new chapter in your career. Or perhaps you have landed your dream job. Or maybe you have been offered a new role within your existing company. Whatever the opportunity presented to you may be, the first thing you need to do before you get too excited is to carefully review the proposed employment contract. It’s easy to overlook the importance of this when you are basking in the glory of the new employment opportunity. Please do not rush the process because the last thing you want is to sign a contract only to realise later that you inadvertently agreed to terms that are unfair or unreasonable. Signing a contract without understanding what it means opens the door for an employer to unfairly take advantage of you.

So if you are contemplating accepting a new position or you have been presented with a revised contract by your existing employer, here are 6 things you really need to know before you sign on the dotted line in your employment contract.

1. You can negotiate the terms of your employment contract.

If you have been offered a new position with a company or perhaps your current employer has presented you with a revised contract, the contract will generally always contain clauses that are ideal for the employer. 

But let me tell you something important. Just because a clause appears in your employment contract doesn’t mean that it is necessarily set in stone. 

For instance, your contract might have a lengthy probation period in it or perhaps it has onerous obligations that kick into action upon the termination of your employment. It could also have post-employment obligations that seek to limit your freedom to pursue a career outside of the company. Whatever the clause may be, if something doesn’t sit right with you or if you feel that it doesn’t properly reflect the terms that were offered to you during your interview, you can always negotiate. 

You can raise the clause(s) with the company, outline your proposed changes and explain your reasons for the changes. If the company wants to bring you onboard (or retain you as may be the case with an existing employer), they will usually be prepared to make some tweaks to ensure that you are happy with the terms of the contract. 

If they are not willing to budge, seek advice pronto from an employment lawyer!

2. Your bonuses and commissions are seldom guaranteed.

People often fall into this trap–Just because a company has hinted at the possibility of you earning massive bonuses doesn’t mean it is a contractual entitlement that you can enforce. 

Most contracts will state that any entitlement to bonus or commission is discretionary and subject to change at any time. It is very rare for the contract to state that you are entitled to earn a bonus or commission and that these incentives will form part of your remuneration package.  And even fewer employers put clauses in contracts that clearly explain how the bonus or commission will be calculated. 

So this means that if things go south, and you try and claim that they owe you bonuses or commissions, your employer will probably argue that there is no contractual entitlement. 

With this said, if the prospect of a lucrative bonus is the reason why you are signing the contract, make sure you check first whether the bonus is guaranteed and properly written into the contract, as opposed to it just being a mere possibility.

You do not want to expect something that you are not entitled to have, and end up sorely disappointed right? So make sure you sort it out with your new or existing employer before even thinking of signing that contract.

3. You may be entitled to overtime and penalty rates.

If you are someone who loves to work overtime (and get paid!) then read this.

If your employment is covered by a Modern Award or an Enterprise Agreement, you may be entitled to overtime rates, penalty rates and other allowances. This is provided that there is no clause in the employment contract that states that you will not get these incentives because your salary is considered to be high enough to ‘absorb’ these incentives. 

Now, if you are unsure whether you are eligible for certain additional entitlements such as overtime or penalty rates, make sure you ask the question before you agree to any proposed salary. Otherwise, you could find yourself working excessive overtime and not getting paid for it.

And certainly, we don’t want that to happen. 

4. You need to look out for non-compete clauses.

To compete or not to compete, that is the question. Poetic, right?

But on a serious note, you must check whether your contract has a post-employment non-compete clause in it. 

A post-employment non-compete clause means that you are prohibited from working for a competitor in the industry (or working for yourself) for a certain period of time and in a certain geographical area, once your employment is at an end. This means that you will not be able to pursue your career the way you intended and you will be restricted in where you work. If you breach the non-compete clause, you could get sued by your employer big time.

So, make sure you read through your contract and understand the clauses so that you don’t encounter nasty problems when your contract ends.

5. You need to be aware of your post-employment obligations.

Now, your contract can get a bit tricky if you are not aware that it contains other post-employment obligations. You need to understand these obligations before you decide to sign the employment contract because they will affect you long after the employment is at an end. 

Aside from a non-compete clause, there are other clauses in contracts that can restrict what you can and cannot do once your employment ends. 

For instance, there may be a restraint clause that says you cannot solicit, entice, or approach other employees of the business for a certain period of time. Or perhaps it says, you can’t solicit suppliers or customers or contractors. You will also have ongoing obligations to maintain the confidential information of the employer, even after your employment ends.

So it’s important to consider what you are getting yourself into before you sign…in case you are really signing your career away.

6. Your contract might get varied.

Just because you and your employer sign an employment contract at the beginning of your relationship does not mean that variations won’t be proposed by your employer over time.

It is common for revised contracts to be presented to you during the life of your employment. You and your employer might agree to make certain changes to your contracts, such as your position title, duties or remuneration. 

Or perhaps there have been changes in the law, which means that your employer wants to update your contract to ensure that it is legally compliant. Or perhaps your employer has just realised that the contract does not provide them with the level of protection they need and the only way to get that protection is to have you sign a new contract. A common example here is the restraint of trade clauses.

Whatever the case may be, be aware that your employer cannot legally force you to sign a varied contract if you do not agree to its terms. You have the right to decline. The only way in which the proposed terms will take legal effect is if you accept the terms, either expressly by signing the varied contract or impliedly, through your conduct if you do not express your concerns and carry on as if all is well.

At the start of an employment relationship or a new contract, the only way to protect your contractual rights is to make sure you read your contract, make sure you understand the clauses and seek advice if in doubt. In this way, you will be better positioned to avoid nasty surprises later down the line if things at work go pear-shaped and you need to rely on your contract to protect your rights. 

How can Rubix Legal help?

At Rubix Legal, we regularly advise employees on employment contracts. We help you to make sense of what it all means and give you the run down of what your rights are.

Please Contact Us at Rubix Legal and talk to a legal expert for guidance on your employment contract.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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