Employment contracts – is annual review necessary?

There is a common misunderstanding that new contracts of employment need to be issued each year – however if you don’t understand the role and significance of an existing contract of employment you could land yourself in hot water. CCSA’s Member Support team explains here:

Employment contracts not only set out the framework of the relationship between the employer and employee, they also limit the risks to both parties and can assist in resolving workplace disputes.

What is the role and significance of the employment contract?

An employment contract is an agreement between an employer and employee that sets out the terms and conditions of employment at the time the contract is signed.

For permanent employees, these terms are generally set for the period of employment, unless changes are negotiated and agreed to by both parties. If any questions or disputes arise about the employee’s terms and conditions of employment, the contract will be referred to for a definitive answer. It is therefore important that the employment contract be clear and current.

Do we have to have an employment contract?

All employees are covered by the National Employment Standards even if they have not signed a contract. However, it is best practice to have a written and signed agreement that provides a summary of the conditions of employment, to avoid any doubt or misunderstandings. Some awards/agreements do have specific requirements of things that need to be set down in writing at the commencement of employment and an employment contract is a good way of meeting this.

What should be included in the contract of employment for a new employee?

When developing a contract of employment, employers must have an understanding of the employee’s entitlements under their respective award and other relevant industrial legislation. The contract of employment is not meant to duplicate all the conditions contained in the National Employment Standards and the award, however it should define the key entitlements and expectations in the context of your specific workplace.

The contract cannot legally create conditions or entitlements that are less than those specified in the relevant award and legislation, even if the employer and employee agree to these. Some terms of an award/agreement can be varied if an employee and employer want to. They can enter into an Individual Flexibility Agreement (IFA) after employment has commenced (an IFA cannot be a condition of employment on recruitment). An IFA can be used to provide some flexible working conditions for employees, and improved efficiency for employers, provided that the changed terms leave the employee better off overall.  Not all award/agreement conditions can be varied so it is important to check which can.

A template contract of employment that meets the requirements of the awards and industrial legislation used in the Early Childhood Education and Care Sector, can be found in the Members Area of the CCSA  website.

Do we have to write new contracts of employment each year?

No. As explained above, contracts of employment for permanent employees remain active throughout the entire period of employment. You cannot, for example, change a permanent employee’s hours of work each year depending on enrolments. Changes to an initial contract can only be made after consultation, which is a discrete process in its own right, and failure to engage in “genuine” consultation with employees may leave an employer vulnerable in a dispute.

Contracts should be reviewed regularly to ensure they reflect the current arrangements. If any changes have been negotiated with an employee, or there have been significant changes to the industrial legislation, or the business model/service type has changes, then a letter of variation to the contract of employment detailing the changes (for example a change in hours of work) should be attached to the original contract.

For more helpful information on the best employment practices for your service, visit the CCSA website.