Is Your Employment Documentation Compliant? Here's Why It Should Be

One tool that can help ensure your company is on the right track is Culture Edge’s compliance check. This tool offers a comprehensive way to assess whether your business is adhering to necessary legal and documentation standards. A common issue that often surfaces during compliance checks revolves around the use of stock standard templates for employment contracts and policies. If your business is relying on free or generic templates downloaded from the internet, you could be exposing yourself to serious legal risks.

The Risks of Using Generic Templates

While free employment contract templates might seem like a quick and easy solution, they often fail to account for the unique aspects of your business. Here’s why using a tailored contract and handbook is not just important, it’s critical to your company’s compliance:

1. Missed Legislative Requirements Free templates usually only cover basic terms and conditions, like the role and basic pay. However, they often overlook essential details such as:

   • Probation periods and their relationship to minimum employment periods

   • Rostering obligations and their compliance with industry-specific regulations on maximum hours and shift obligations

   • Specific awards and their application to your workforce

   • Remuneration specifics, particularly if you pay an annual salary or above the minimum wage. For example, if you're paying an annual salary, you must ensure compliance with annualised salary requirements. This involves documenting how you arrived at the salary, considering all allowances, penalty rates, and loadings, and ensuring your figures are accurate. Without this, you could face serious compliance issues.
     
     
     

2. Underpayment Risks In some cases, businesses mistakenly assume that paying an annual salary covers all entitlements. However, without the proper breakdown of components, you may be violating the legislation. Additionally, if you pay more than the minimum entitlements, you may need to rely on an offset clause to adjust for any future underpayments. This clause allows you to offset overpayments, but it must be clearly defined in the contract to avoid legal confusion.
   
   

3. Protecting Your Business Interests Generic templates rarely include protections for your business, such as clauses preventing employees from:

   • Stealing confidential information

   • Soliciting your clients or customers

   • Engaging in competing businesses while employed or immediately after departure

Without these protections, your business may find itself vulnerable to damage, theft, or loss of clients without recourse.

4. The Danger of Overloading Contracts Sometimes, businesses add too much to their employment contracts, such as company policies, bonuses, and specific legislative entitlements. This can cause issues down the line. Once something is included in a contract, it becomes a legally binding document, meaning any changes require the employee's consent. For example:

   • Policies, incentives, and commission structures should be kept separate from the contract. If you need to amend them in the future, it’s easier to update a policy or bonus program rather than renegotiate a whole contract.

   • Legislative entitlements are subject to change and should be handled outside the contract to avoid creating unnecessary complexities.
     
     

5. Notice Periods and Award Compliance Another area where businesses often slip up is in setting notice periods for termination. If your contract specifies a notice period that’s shorter than what’s required under the applicable award or enterprise agreement, it can lead to a significant underpayment risk.
   
   

Why You Should Start Fresh When Updating Contracts

Finally, if you find that your business needs to update or revise an employment contract in the future, make sure to start from scratch. Reusing old contracts can result in missed updates to the law or changes to compliance tools that would keep your organisation up to date. Employment law can change frequently, and keeping your contracts current is key to avoiding costly mistakes.

Using a compliance tool like Culture Edge’s compliance check can help you identify any areas where your business might be at risk, allowing you to make adjustments before issues arise.

So, before you download another free template, consider the long-term benefits of investing in properly tailored documentation. Your business, and your bottom line, will thank you!