3 benefits of having employee contracts

Small and large businesses alike may grapple with the idea of entering into a written contract with their employees. While it is not always necessary, engaging in an employee contract can be beneficial for businesses that are looking to retain employees and keep trade secrets.

At the most basic level, an employee contract outlines the expectations that the employer has for their new hire. As LegalMatch explains, employee contracts can include anything from benefits and policy to grounds for termination. They can be the first step to building trust between an employer and an employee. Deciding what to include in your employee contract depends on what you are trying to accomplish as a business, but there are distinct benefits to gain as the employer by including certain terms.

1) Protect Trade Secrets

Trade secrets are the foundation of success for some businesses, and if they are compromised, a company can suffer. Defining a trade secret can be tricky as it can be considered anything from a specific recipe, a special mechanical component or even a method of creation as FindLaw reported. No matter what, protecting trade secrets is crucial for the continued success of the businesses that rely on them.

To essentially keep a trade secret out of the hands of competitors, it is important to put a confidentiality clause in your employee contract. This is best for employees who will need to learn about a trade secret or have access to client lists to do their job. A confidentiality clause will prevent employees from disclosing the trade secret(s) they may learn during their time working for your business.

Additionally, to make sure employees will not leave and immediately use their acquired knowledge at a competitor's business, a covenant not to compete clause may be added to an employee contract. In this kind of clause, a former employee is prevented from competing with your business for a disclosed amount of time after they leave your company.

2) Retain Efficient Employees

Having a clear employee contract can also help you to retain the best employees. You may want to consider adding terms such as "reasons for termination" and "term of employment" to set clear expectations for your employees. Not only will your employee appreciate the transparency, but BusinessCollective recommends having a firm commitment as one of the ways to keep the best employees around longer. 

Employees can feel comfortable that as long as they are acting in accordance with their contract they cannot be terminated by their employer. Such contracts usually set clear rules for conflict resolution so employees and employers alike are aware of how to proceed if their contract appears to be breached.

3) Attract the Best Talent

Just as a contract can be used to retain existing talent, it can also be used to attract new talent to your business. Having the ability to offer a professional contract to new employees can appeal to them in the same ways that they appeal to existing employees. FindLaw reported that the best of new talent will most likely be offered contracts from a multitude of potential employers. Making sure that your contract stands out as the most professional and the most beneficial to a potential employee can help you make up their mind.

An employee contract can help protect trade secrets and retain and attract the best talent.

Once again, including the term of employment in your contract can attract new hires that are looking for a precise time of employment with your business. Whether it be until the completion of a project or indefinitely, these are important factors that a new hire wants to know. Making sure your employee contract is transparent allows all parties involved to be more relaxed while still have clearly defined rules and expectations.

Of course, there are other factors to be included when entering into an employee contract. An attorney for business can help you navigate the world of employee contracts to make sure you are both complying with state laws and including the terms and conditions that best benefit your business.

Categorised in: Contracts & Transactions

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