When we speak of startup companies, these are businesses established when there is a certain demand for goods or services. The intention of a startup is to rapidly grow as a result of offering something that addresses a certain market gap. And like all companies, this will need a set of employees to help run the business, and although not required a written employment contract is highly advisable so companies can exercise some degree of control over an employee’s performance and other relevant things. It can’t be helped since there are some quite offensive employees out there and for companies, this is one way of protecting the interest of both parties. Learn and read more about this particular kind of employment contract below. And don’t forget to check out our free startup employment samples if you need help drafting an employment contract for your startup business.
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What Is a Startup Employment Contract?
Generally, an employment contract will help both parties understand their working relationship. This document will clarify details and set out terms for the employee and the employer. More importantly, a startup employment contract will help protect the startup company in an event of a termination and could also serve as a useful tool to attract other new employees. A startup may want to look for several ways to retain employees with specialized skills and knowledge that is critical to the company’s key business functions. This is why it is important to include in any employment contract for that matter that disclosure of vital information should have its own terms.
How To Create a Startup Employment Contract?
As mentioned before, a startup employment contract should protect the best interest of both parties. It cannot be helped at times when misunderstandings, incidents, or sudden employee departure occurs and the contract will serve as a reference to address particular concerns. The details of each contract may depend on company policies while in general there may be commonalities in this particular document. So let us discuss the common elements that will help you create a well-crafted startup employment contract.
1. Terms of Employment
These are the benefits and responsibilities that an employee agrees to when they accept a job. For startup employees, this can be a fixed-term contract or indefinite.
2. Employment Period
This clause is mainly for the job security of an employee working in your startup. An employment contract must mention the employment period for an employee. It should mention the period for probation as well.
3. Remuneration and Compensation
You will need to include in your contract the salary or wages, the payment terms, and the schedule. Also, the compensation for the services needs to be mentioned in the employment agreement. The compensation is normally provided as a company expense and it has components like basic salary, house rent allowance, medical allowance, transport allowance, etc. It could be on an annual basis or sometimes can also be on monthly basis.
4. Salary, Leave, and Benefits
Business owners have their own specific ways of paying their employees, so make sure to include this as well as for any leave credits and other common employee benefits.
4. Termination Clause
An employment contract must include enforceable termination which will explain certain details such as an employee’s right to notice or severance upon termination. There should also be a clause in the contract informing the employee to provide reasonable amount of time for a resignation. Startup business will be in such a crunch if their employees suddenly decide to resign without proper notice.
5. Restrictive Covenants
The contract will help limit an employee’s ability to disclose information or seek employment with a competitor through certain restrictions or restrictive covenants. This may include nondisclosure, confidentiality, non-competition, and non-solicitation. Each employee’s job position must be examined accordingly to determine which covenants are appropriate.
What Is a Restrictive Covenant?
This is an agreement that restricts a company or other party to a contract from engaging in certain actions.
What Is a Startup?
This is a company that is typically in the early stages of its development. It is initiated by its founders around an idea or a problem with a potential for significant business opportunity and impact.
How Do You Terminate a Contract?
A contract is essentially terminated once the obligations outlined in the contract are completed. An early termination contract refers to the dissolution of a contract before the term of that contract has concluded. Use the termination clause, and follow the steps stipulated in it to release yourself from the contract. Generally, a termination clause will stipulate that due notice of termination must be given in writing for termination to be acceptable.
For startups or any other business of that matter, preparing an employment contract is quite important most especially if there are any legal matters to be dealt with.
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