An employment contract in Australia should cover the role, remuneration, hours of work, leave entitlements, notice periods, and confidentiality at minimum. Most small business contracts we review are missing at least two of these, and some are missing more. Here is what yours needs to include.
You do not need a contract that runs to 30 pages. Most employees will never read that much and it creates more confusion than it resolves. What you do need is a contract that is clear, complete, and legally sound.
The contracts we see most often in small businesses fall into a few categories: old templates downloaded from the internet years ago, contracts copied from a previous employer, or nothing at all. All three create risk.
What must be in an Australian employment contract?
Australia’s employment framework is built on the National Employment Standards (NES), which are the minimum entitlements that apply to all employees regardless of what their contract says. A contract cannot remove or reduce NES entitlements. What it can do is clarify the terms of employment above those minimums. (Fair Work Ombudsman — National Employment Standards)
At minimum, a well-drafted employment contract should include:
| Clause | What it should cover |
|---|---|
| Commencement date and employment type | Full-time, part-time, casual, fixed term. Each has different legal implications. |
| Role and responsibilities | Job title and a summary of the key duties. Not an exhaustive list, but enough to define the role clearly. |
| Remuneration | Base salary or hourly rate, super, and any allowances. Reference the applicable modern award if one applies. |
| Hours of work | Ordinary hours per week and any flexibility arrangements. For casual employees, the arrangement for rostering. |
| Leave entitlements | Annual leave, personal leave, parental leave. These are covered by the NES but it is good practice to reference them. |
| Notice periods | How much notice is required from each party to end the employment. Minimum notice periods are set by the NES and cannot be contracted below. |
| Probationary period | Typically three to six months. Sets expectations on both sides and affects unfair dismissal eligibility. |
| Confidentiality | Protection of business information, client lists, and commercially sensitive material during and after employment. |
| Restraint of trade (if applicable) | Post-employment restrictions on working for competitors or soliciting clients. These need to be carefully drafted to be enforceable. |
| Modern award coverage or enterprise agreement | Which industrial instrument, if any, applies to the role. |
The clauses most small business contracts are missing
After reviewing hundreds of small business employment contracts, these are the gaps we see most often:
- No award reference. If a modern award applies to the role (and for most industries in Australia, one does), the contract should reference it. Not referencing it does not make it go away. It just means the employee may not know their rights and the employer may not know their obligations.
- Outdated remuneration. Contracts that still show the original starting salary from three years ago, with no mechanism for pay reviews. If the employee is now being paid more, the contract does not reflect reality.
- Vague role descriptions. “Other duties as required” is not a role description. When performance issues arise or a role changes significantly, a vague contract makes everything harder.
- No probation clause. Without a probation clause, the default minimum employment period for unfair dismissal applies. With a clearly drafted probation clause, you have more flexibility in the early stages of employment.
- Unenforceable restraint clauses. Restraint of trade clauses that are too broad, too long, or not linked to a legitimate business interest are generally not enforceable. If yours were copied from somewhere else, they probably need a review.
“A contract that does not reflect how someone actually works is not just incomplete. It is a liability. We see this with contractors classified as employees, casuals who work regular patterns, and managers paid below award. All fixable, but easier to fix before something goes wrong.”
Does a contract override an award?
No. A modern award sets minimum conditions. A contract can offer better conditions than the award but cannot offer less. If your contract says an employee gets three weeks annual leave but the applicable award requires four, the award takes precedence.
Do casual employees need a contract?
Yes. Casual employees have different rights to permanent employees, including a casual loading in lieu of leave entitlements, and since 2024 they have enhanced rights around conversion to permanent employment. A well-drafted casual contract protects both parties. (Fair Work Ombudsman — Casual Employees)
How often should I review my contracts?
At minimum, any time there is a significant change to someone’s role, pay, or working arrangements. Also worth doing a general review any time there is a significant change to employment law, which in Australia has been fairly regular in recent years.
If your contracts have not been reviewed in the last two years, it is worth getting them looked at. Jigsaw HR offers contract reviews as a standalone service for businesses across Australia and New Zealand.
Not sure if your employment contracts are up to date? Jigsaw HR can review them and tell you exactly what needs fixing.