Employment contracts come up in almost every conversation with business owners, and the questions are usually the same. Do you actually need one? What should it cover? Can you change it later? This article works through the most common questions about employment contracts in Australia, what they need to include, where they sit alongside the law, and what to do when something changes.
What is an employment contract?
An employment contract is a legal agreement between an employer and an employee that sets out the terms of the employment relationship. It typically covers things like position title, hours of work, remuneration, and notice of termination provisions. It is the foundation document for the relationship, and it should reflect what has actually been agreed between the parties.
Do I need to have an employment contract for my employees?
No, there is no legal requirement to have an employment contract. What the law does require is that employers keep accurate records. The Fair Work Act 2009 and the Fair Work Regulations 2009 set out what those records need to include, such as the employee’s name, commencement date, employment status, pay rate, hours worked, leave taken and leave balances, and superannuation contributions. You can find the full list on the Fair Work Ombudsman’s record-keeping page.
Many employers use an employment contract as the practical way to meet these obligations and document the terms clearly from day one.
Source: Fair Work Act 2009 sections 535, 539; Fair Work Regulations 2009 regulations 3.31–3.44, 4.04
Why is an employment contract useful?
A well-drafted contract removes ambiguity around the terms of engagement and termination. It can also include provisions to protect the business, such as intellectual property clauses confirming that work created during employment belongs to the business, and confidentiality clauses protecting sensitive information.
Some contracts also include restraint of trade provisions, which can restrict an employee from poaching customers or staff, or working for a competitor for a defined period after leaving. Courts often strike these clauses down when they go further than necessary to protect a legitimate business interest. The government has also announced reform in this area: a ban on non-compete clauses for employees earning below the Fair Work high income threshold is intended to take effect from 2027, subject to legislation passing parliament. If your contracts currently rely on restraint clauses, it is worth keeping an eye on this and reviewing your approach as the legislation progresses.
What is a contract variation?
If something changes from the original terms of employment, for example an employee moves from full-time to part-time, takes on a different position, or has a change to hours that was not already provided for in the original contract, you should document this with a contract variation signed by both parties. This keeps your records accurate and avoids disputes later about what was actually agreed.
How can I amend a contract of employment?
A contract is a legal document, and it can only be changed if both parties agree. One party cannot unilaterally vary the terms. Any change should be put in writing and signed by both the employer and the employee.
What happens if an employee doesn’t sign their contract?
If an employee starts work without signing a contract, an employment relationship still exists and the National Employment Standards still apply. However, you lose the certainty that comes with an agreed, signed document, and any contractual terms you wanted to rely on, such as a restraint clause, may be difficult to enforce. It is good practice to have the contract signed before or on the employee’s first day.
Do casual employees need a different type of contract?
Yes. A casual employment contract should reflect the nature of casual engagement, including that there is no guaranteed pattern of hours, and that the employee receives a casual loading in place of entitlements like paid annual leave and personal leave. Casual contracts should also reference an employee’s right to request conversion to permanent employment in line with the Fair Work Act.
Does an employment contract override the award or enterprise agreement?
No. An employment contract cannot provide for terms that are less favourable than the relevant award or enterprise agreement. Where a contract is silent on an entitlement, the award or agreement will generally fill the gap. Where a contract attempts to contract out of an award entitlement, that part of the contract will not be enforceable.
Can an employment contract include a probation period?
Yes. A probation period is commonly included to allow both parties to assess whether the role is the right fit. It does not change an employee’s legal entitlements during that time, including access to unfair dismissal protections once the minimum employment period has passed, but it does give the employer a clearer basis to assess performance and fit early in the relationship.
Where can I access a template employment contract?
A contract is a legal document, so it is important that yours is up to date and in line with current legislation. At The HR Impact, we have compliant employment contract templates available for businesses to use for full time, part time and casual employees. Beyond this, there are other free resources available, including a template employment contract via business.gov.au