A clear, well-drafted employment contract is one of the most useful documents a small business can have: it sets expectations on both sides, reduces the risk of disputes, and gives you something concrete to point to when questions come up about pay, hours, leave or conduct. Yet many Australian employers still rely on a verbal agreement or a generic template and only discover the gaps when something goes wrong.
An employment contract is the agreement that governs the working relationship between you and an employee. It can be written, verbal, or a mix of both — but a written contract is far easier to rely on. It records what each party has agreed to, from the role and pay through to notice periods and confidentiality.
A good contract matters for a few practical reasons. It removes ambiguity, so both sides understand the arrangement from day one. It helps you meet your obligations under Australian workplace law and keep accurate records. And if a disagreement arises — about overtime, a termination, or the use of confidential information — a written contract gives you a documented starting point rather than competing memories of a conversation.
Every business is different, but most employment contracts should address the following:
Name the employer (the correct legal entity) and the employee, and describe the position, including job title, key duties and who the person reports to. A short, accurate role description helps set expectations and supports later conversations about performance.
State whether the role is full-time, part-time or casual, as each carries different entitlements. Set out ordinary hours of work and how additional hours are handled. Casual arrangements in particular need care, given the rules around casual employment and casual conversion.
Record the rate of pay or salary, how and when it is paid, and superannuation. Be clear about whether any allowances, loadings or bonuses apply. Pay arrangements must be consistent with any applicable award or the NES.
Reference the leave entitlements that apply — annual leave, personal/carer's leave, compassionate leave, parental leave and others under the NES. The contract should reflect these minimums, not attempt to reduce them.
If you use a probationary period, state its length and what happens during and at the end of it. Note that probation does not override an employee's legal entitlements or minimum notice.
A confidentiality clause protects sensitive business information — client lists, pricing, processes and the like — during and after employment. Keep it reasonable and specific to your business.
Set out how the employment can end, the notice required from each side, and any obligations on exit (such as returning property). Minimum notice periods are governed by the NES, and the contract should meet or exceed them.
This is the part employers most often get wrong. An employment contract sits on top of a legal floor — the National Employment Standards and, where one applies, a modern award. The NES sets out minimum entitlements for most employees in the national workplace relations system, covering things like maximum weekly hours, leave and notice of termination. Modern awards add industry- or occupation-specific minimums on pay rates, penalty rates, allowances and more.
The key principle: a contract cannot undercut the NES or the relevant award. If a clause provides less than the legal minimum, that clause is generally unenforceable, and the minimum still applies. You can offer more than the minimum, but never less. This is why a contract should be drafted with the applicable award (if any) clearly in mind — the two work together, and the award usually wins where there is a conflict.
Free templates can look like a quick fix, but they carry real risks. A generic template may not reflect the award that covers your employees, may use clauses drafted for another jurisdiction, or may include terms that don't suit your business. Out-of-date templates can also miss changes to workplace law.
The practical danger is a contract that looks complete but doesn't hold up — for example, a pay clause that sits below the award rate, or a notice provision that falls short of the NES. A tailored contract, matched to the role and the correct award, gives you far more certainty and is easier to rely on if a dispute arises.
Employment Star works with Australian small businesses on the practical side of getting employment documentation right. Through our HR consulting, we can help you review existing contracts, identify gaps against the NES and the relevant award, and develop contract templates that suit your roles and your business. Consulting is available at $195 per hour, and we can scope the work with you before we start.
If you would like a second set of eyes on your contracts, or you're hiring and want to start on a solid footing, get in touch to book a free discovery call.
General information, not legal advice. This page is intended as general guidance for employers and does not take into account your specific circumstances. For advice on your situation, speak to a qualified professional.
No — a contract can be verbal or implied. But a written contract is strongly preferable because it records what was agreed and is far easier to rely on if a question or dispute arises.
No. A contract cannot provide less than the National Employment Standards or an applicable modern award. Any clause that undercuts those minimums is generally unenforceable, and the minimum applies instead. You can offer more than the minimum, just not less.
Casual employment carries different entitlements from full-time and part-time work, including rules on casual loading and casual conversion. It's sensible to use a contract drafted for casual arrangements rather than adapting a permanent template.
The working relationship still exists and is governed by the NES, any applicable award and any verbal agreement. The main risk is uncertainty — without a written record, it can be difficult to establish what was actually agreed.
It's good practice to review contracts periodically and when circumstances change — for example, a change in role, a relevant change to workplace law, or an award update. Regular reviews help keep your documentation current and reliable.
Need help getting your employment contracts right? Employment Star’s HR specialists can review your documents and close the gaps — book a free discovery call.
