A well-drafted employment contract is a vital legal tool for Australian businesses. It outlines the terms and conditions of employment while ensuring compliance with the Fair Work Act 2009 and the National Employment Standards (NES). Carefully incorporating key clauses into employment contracts helps mitigate legal risk, protect business interests, and promote transparency between employers and employees. The content that follows functions as a practical checklist for employers aiming to create compliant, effective, and enforceable employment agreements.

Essential Clauses to Include in Every Employment Contract

The following clauses are fundamental to creating clear, compliant, and enforceable employment contracts for your workforce.

1. Role and Responsibilities

The contract should clearly define:

• The employee’s job title and classification
• Core duties and responsibilities
• Reporting structure

This clause establishes a clear understanding of the employee’s role within the business. It should describe not only the tasks the employee is expected to perform but also the standards of performance, key performance indicators (KPIs), and any authority or decision-making powers. This clarity reduces ambiguity and supports both performance management and legal compliance in areas such as unfair dismissal.

For more information, refer to the Fair Work Ombudsman’s guidance on employment contracts.

2. Remuneration and Entitlements

Specify:

• The base salary or wage
• Frequency of payment
• Superannuation contributions
• Details of any bonuses, commissions, or other benefits

Employers must ensure that remuneration complies with the National Minimum Wage and relevant Modern Awards or Enterprise Agreements. It is also important to clarify whether remuneration includes allowances, loadings, or overtime. Including a provision for review of salary or remuneration on an annual or periodic basis is recommended to manage expectations and ensure ongoing compliance.

Further details can be found on the Fair Work Ombudsman’s page regarding minimum wage requirements.

3. Hours of Work and Flexibility

Outline:

• Ordinary hours of work and break times
• Overtime arrangements
• Any flexibility provisions consistent with the NES

Clauses relating to hours of work should reflect the operational needs of your business while complying with legal limits on maximum weekly hours. Consider specifying rostering practices, procedures for requesting flexible work arrangements, and any time-in-lieu entitlements.

Refer to the National Employment Standards for legal requirements on working hours and flexible arrangements.

4. Leave Entitlements

The contract should reflect all leave entitlements under the NES, including:

• Annual leave
• Personal/carer’s leave
• Parental leave
• Long service leave (where applicable)

It should also address any company-specific leave policies such as unpaid leave, study leave, or additional paid leave. Clearly defining how leave is accrued, taken, and managed (e.g., notice requirements, approval processes) ensures transparency. For part-time or shift workers, pro-rata entitlements and leave accrual based on hours worked should be clearly explained to avoid confusion and disputes.

Leave entitlements are outlined in the National Employment Standards.

5. Confidentiality and Intellectual Property

Protecting business interests is essential. Clauses should cover:

• The obligation to maintain confidentiality during and after employment
• Ownership of intellectual property created in the course of employment

These provisions are particularly important in roles involving access to client lists, sensitive data, trade secrets, or proprietary processes. The clause should specify what constitutes confidential information and how long post-employment obligations last.

6. Termination and Notice Periods

The contract must detail:

• Required notice periods for both parties
• Grounds for summary dismissal
• Redundancy entitlements in accordance with the NES

This clause should be drafted to align with the NES and any applicable industrial instruments. It is also useful to include provisions covering resignation procedures, return of company property, and final payment. A well-drafted termination clause helps protect the business against wrongful termination claims and ensures compliance with statutory obligations regarding notice and redundancy payments.

For further guidance, see Fair Work’s page on ending employment.

7. Post-Employment Restrictions

Consider including reasonable restraint clauses such as:

• Non-compete clauses preventing employment with direct competitors
• Non-solicitation clauses covering clients and staff

These clauses can be crucial for protecting business interests following the departure of key personnel. The enforceability of such clauses depends on whether they are reasonable in duration, geographic scope, and the nature of restricted activities. It is best practice to tailor these provisions to the employee’s role and level of access to sensitive information.

Helpful Tools and Resources

The following Fair Work resources are useful for reviewing or drafting employment contracts:

• Fair Work Ombudsman – Employment Contract Template    
• Fair Work Ombudsman – National Employment Standards
• Australian Government (business.gov.au) – Employment Contract Tool
• Fair Work Commission – The Difference Between Awards and Agreements  

Final Remarks

Incorporating these employment contract clauses helps ensure legal compliance and provides clarity for both employer and employee. Properly drafted agreements form a critical part of sound employment practices and mitigate potential legal risks.

At Pentana Stanton Lawyers, our employment law team advises employers across Australia on contract drafting, compliance, and workplace disputes. We assist businesses in ensuring their employment contracts are clear, enforceable, and aligned with Australian workplace laws.

Get tailored legal advice for your business by contacting our employment law team.