Employment agreements are an essential part of the hiring process, a must-have for the HR industry and for the employees as well. Knowing this it's even kind of strange that globally over 60% of workers lack any kind of employment contract. There are also a lot of people working without a written contract relying only on what's being orally agreed upon. Although an oral agreement can be legally binding, it can be very difficult to regulate and prove the conditions that were discussed.
It's 2023 and of course, we know better than this. A written employment contract is mandatory if you want you and your employees to be on the safe side, running things as smoothly as possible.
If you're a startup, the employment process is vital since it will most probably determine the future of your organization. Who you hire and under what conditions is maybe the most essential thing at this stage. Providing clear and transparent employment contracts will set the tone of your company, building the foundations for how things are to be done in the future. It will also help to be taken seriously by both your potential employees and your competition although you're just starting up.
On the one hand, being a startup in 2023 isn't easy because the competition is greater than ever. On the other hand, there are many different tools you can use to ease the initial process as well as get yourself up-to-date on the latest trends and working standards.
The manner in which you handle hiring and resignation at this stage will establish the basis for either building a safe and transparent environment or a working environment that is not reliable and will not push the company upwards.
To further prove our point we've put together a list of four ways in which employment contracts with their professional use are a great asset for startup companies in the process of hiring and resignation. Here are some ways in which contracts can help your business.
1. Establish termination conditions
When talking about employment contracts people usually initially think of the salary, bonuses, and holidays. However, there is a very important aspect that is usually overlooked: the termination of the contract.
A professional employer sets the record straight from the very beginning, letting the employees know about what is expected from them during the resignation process. This part usually includes what kind of tasks they have to fulfill in order to legally terminate their employment. These tasks can include:
• Writing a resignation letter within a given time frame before leaving the company. The resignation letter will need to include certain points and references. That's why it's always a good idea to stick to a resignation letter sample.
• Transferring knowledge to other team members or colleagues. This sometimes means training potential substitutes or it can also mean delegating the employee's tasks to existing colleagues.
• Completing ongoing projects or tasks. The contract can be very clear about the obligation of the employee to finish all existing projects and fulfill tasks that have already been initiated.
• Communicating to the manager and HR about the intention to leave the company so that plans can be made for the employee to finalize their transition projects in due time.
There are many other aspects regarding the termination of employment that can be included in the contract and should not be taken lightly. Many contracts include information about future employment, especially in competitive companies. There is usually information about possible disputes and courts which are authorized to legally settle the case if the need arises.
All of this information should be very clear to the onboarding employee, which will make resigning and terminating the contract as smooth as possible for both parties.
3. Save time and energy
Employment contracts are not what they used to be. As with everything else, digitalization and technology have also transformed contract management. The contracts management lifecycles are now in most cases automated and AI-generated, leaving HR and legal professionals with more time and energy to focus on bigger tasks.
The whole process that leads to the actual signing of the contracts consists of several stages such as:
• creation of the contract
• negotiating conditions
• ongoing management
This list is not final and can be altered to serve the needs of the process. All of these steps used to be executed manually. With the digital transformation of modern businesses, most of these are now part of an automated process that makes the experience much better for both sides.
Automating this process is especially important for startups in two very important aspects:
• it saves time, resources, and money
• it reduces errors, potentials issues, and risks that sometimes arise in contracts
It's self-explanatory that both of these aspects contribute to boosting trust and reliability between employers and employees.
3. Manage expectations
Clear predefined working conditions, as well as the conditions under which the employment starts and terminates can be essential in the process of building trust between employers of all levels. Setting up the rules from the very beginning is crucial in creating a positive and safe working environment. Especially for startups that are about to develop, bringing in more and more people on board.
The points outlined in the employment contract manage the expectations for both the employer and the employee.
• Employers must know their limits and boundaries with respect to the work-life balance. The contract should be a sacred manual and a constant reminder when it comes to instances like working hours, days off and all day-to-day expectations managers have from employees. It's very easy to make the mistake of holding only employees accountable for their obligations in the contract. Employers are an equal party in the process and should be held accountable for their part.
•Employees on the other hand must manage their expectations in terms of salary, promotions, benefits, bonuses etc. Once all of these issues are clearly stated in the contract, the employment relationship can start off on a solid base.
It's also worth mentioning that including all relevant issues in the contract itself is not enough. The most important things must also be discussed and elaborated during the process of negotiation as well as approval in order to achieve maximum results when it comes to managing expectations and avoiding possible misunderstandings and disputes.
4. Boost productivity and engagement
It might sound a little bit strange that the employment contract can influence productivity and engagement whatsoever, but indirectly it certainly can. Here is how.
• By starting off with clear expectations and mindset employees feel less stressed about their working conditions and concentrate more on being productive.
• Clear and transparent contracts build trust between managers and employees and this immediately results in more engagement and devotion to the workplace.
• The possibility of conflict is brought to a minimum by signing a quality employment contract. This in turn helps create a positive, safe, and friendly working environment where employees feel happy and actually like doing their work.
• Starting off with clear expectations increases confidence in workers, mainly due to the fact that they know what is expected of them and what goes out of the limits of their job description. Increased confidence can do wonders for employee productivity and morale.
Whether we're talking about startups or big, successful companies, increasing performance and engagement is always a number one goal for the HR team. So it's needless to say that happy and fulfilled workers will do a better job. And it all starts with the contract they sign even before their first day at work.
We hope that what we've put together as a list of the most important aspects in which employment contracts help build trust through transparency in startups, will inspire you to stop and think about the importance of such a mundane, administrative, and not a very creative aspect of doing business.
Creating, administering, and managing contracts is usually seen as a boring and repetitive task that simply must be completed. However, if done right it can be the foundation of a trust-filled and transparent relationship between employers and employees. It will also be the root of a growing and successful business. So, exploring some of these aspects further will bring you to creating professional and comprehensive employment contracts and will help your startup onboarding processes.
The WorkFlow podcast is hosted by Steve Glaveski with a mission to help you unlock your potential to do more great work in far less time, whether you're working as part of a team or flying solo, and to set you up for a richer life.
To help you avoid stepping into these all too common pitfalls, we’ve reflected on our five years as an organization working on corporate innovation programs across the globe, and have prepared 100 DOs and DON’Ts.