WHAT REALLY NEEDS TO BE INCLUDED?
By Patrizia Piccolo
Each time an employer considers putting pen to paper (or
fingers to keyboard, as the case may be) to draft an em-ployment
contract, the potential for costly errors exists.
However, if proper forethought is given to the essential
terms of the contract, then mistakes can be avoided, money can be
saved and heartburn can be escaped.
First things first, even before starting to draft the contact, the
employer must think through the context in which the employ-ment
contract is being drafted. That is, why are you, the employer,
entering into this employment agreement? Is it because you’re hir-ing
a new employee? Is it because you need to enter into a new
agreement with an existing employee? Is it because there is a sale
of business that is taking place? Each of these situations requires
thoughtful contemplation of different key provisions. Having said
that, there are some common important contractual terms that
must be included in all agreements.
KEY TERMS FOR ALL EMPLOYMENT CONTRACTS
All employees are hired in order to perform services for their
employers in exchange for compensation. The definition of
compensation (including variable compensation) is consequent-ly
one of the most important terms for all employment contracts.
One would think that it is easy to simply state what an employee
is going to be paid. However, complications occur when an em-ployee’s
compensation is variable and includes components like
commissions and bonuses.
With regard to commission entitlements, employers should
think about things like (the list is not all inclusive, but intended
to get your brain its daily work out):
■■ How much commission does an employee earn?
■■ Is it earned on gross sales or net sales or some other revenue?
■■ When is a commission earned? Is it earned the moment
the client signs the purchase order? Or, is it earned when
the employer receives payment for goods and/or services
■■ And, what happens if an employee is terminated in the
middle of a commission cycle?
■■ Does an employee continue to receive commissions during
a reasonable notice period paid in relation to a termination
without just cause?
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HRPROFESSIONALNOW.CA ❚ OCTOBER 2017 ❚ 41