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What Should You Know Before Signing An Employment Contract?

Written by mrafeeq · >
Job Contract checklist

Estimated reading time: 10 minutes

What Should You Know Before Signing An Employment Contract?

Receiving a job offer should not cloud your responsibility to undertake due diligence. You may feel excited about being offered a new job, especially if it’s your first step in your career or moving to a larger company. It’s understandable. Just don’t let your excitement blind you to the details in your contract. Take a couple of deep breaths and read your job contract carefully.

You must look out for the details in your contract. Confirm that the details match what was discussed during the interview. It’s also essential to take a long view. You may think exit restrictions or benefits like parental leave aren’t significant now, but life can change quickly, and it’s good to know about your benefits and responsibilities.

Typically, you have a short window before signing your contract. Don’t rush — if you’re unfamiliar with the state or country you’re in, it may be prudent to have an attorney or lawyer go through it with you. This could potentially save you a lot of stress later on.

We’ve put together a list of things you should look out for in your next job contract. Consider this a starting point. Don’t be afraid to clarify anything you don’t understand. You also have the right to ask for changes to the contract, although your bargaining power will depend on your career to date and experience. Let’s get started.

  1. Job title and job description

It’s critical to confirm the scope of responsibilities of the role you’ve been offered. If the role details were discussed during the interview process, ensure the contract details reflect these discussions.

It’s essential to understand what you will be held responsible for. It also allows you to delineate what is not your area of responsibility. In some jurisdictions, the company’s job advertisement and other written communications can be considered part of the contract. Keep all documentation from the company in a file along with your agreement. The information may prove helpful if things turn sour later on. If the role description is too vague, you may be forced to take on more than you agreed or imagined. Don’t hesitate to ask clarifying questions. It may also be helpful to find out about the company’s working culture to see if extra unpaid work (overtime, for example) is the norm.

2. Restrictive clauses/covenants

This section on your contract may not be relevant to you right now or even during your time at the company. All the same, it is a valuable exercise to go through the details here carefully. If you decide to move on from the job, you may face restrictions about who you can work for or work with for a while. Don’t let this discourage you from building contacts throughout your career — just be aware of the conditions governing those relationships.

  • Non-compete clause: this may prevent you from working for a competitor or starting a competing business,
  • Non-solicitation: these restrictions focus on preventing you from poaching customers from the existing company,
  • Non-dealing: a clause like this can restrict you from working with former colleagues or B2B partners for a while,
  • Non-poaching: commonly, you may not entice colleagues away from the company to hire them yourself for a while.

Generally, these conditions must be considered ‘reasonable’ to be enforced. That means you may face typical restrictive conditions for around 3–24 months after you leave the company (depending on the specific situation and state/country legislation).

Employees should be concerned with their non-compete agreements, as it is one of the most important legal documents that they’ll have to sign. Non-compete agreements are contracted employees sign during their hiring process, which restricts them from working for a competitor of the company they are currently employed with for a specified amount of time after they stop working there.

For example, some companies will require their employees to sign a non-compete agreement that lasts six months after they cease employment. However, other companies extend this period up to two years. It all depends on the industry and potential competition if an employee leaves for another firm or starts their own business.

3. Contract start/end dates and possible delays

Confirm that the commencement date of your contract matches what was agreed on. This is particularly important if you’re to be paid by the day — if the date is later than you discussed, you could miss out on wages. Check also that the length of the contract is accurate. If you have agreed to work for a particular time, ensure it has been written clearly. If you can, have the start and end dates specified, rather than listing a period.

Some jobs require background clearances to be attained before starting work. If you already have the necessary checks, this is unlikely to delay your start date. However, if you need to get them, you can avoid starting with your contract. Clarify this before you sign the papers.

4. Salary/benefits

Before signing the job contract, check that the listed salary matches the figures discussed during the interview process. You must confirm these changes if you have negotiated a new salary or different benefits than stated. Included non-salary benefits like a company car, health insurance, or pension/superannuation payments should also be specified. Any conditions relating to commissions, share options or bonuses should also be limited. If there are payments based on performance, ensure the contract outlines who decides if targets have been met and how those decisions are made.

5. Taxation implications

There are often specific taxation implications when signing a new contract. The responsibilities will be influenced by your situation. For example, if you work as an independent contractor, your tax details will differ from that of a salaried worker. Ensure your role is outlined explicitly for taxation purposes to make informed decisions. Having incorrect tax information can lead to significant liabilities, so it’s worth consulting an accountant if you are unsure.

In the UK, most public-sector contracts come under IR35, so it is vital to check that this has been disclosed and the implications have been discussed with you. It is critical as there are higher tax implications.

6. Leave entitlements

Never assume that leave entitlements are in place or standardised across your industry. Depending on your location, there may be minimum legislated leave entitlements. Check your contract for the following:

  • How many annual leave days can you take per year?
  • When does the holiday calendar year begin? When you start work may impact how much leave you can access.
  • Do you have paid or unpaid sick/personal leave days? How many?
  • Do leave days roll over each year, or do they expire if unused?
  • Can accrued leave entitlements be cashed out at the end of the contract?
  • Are there restrictions around when you can take leave? For example, sometimes company-wide leave is enforced, or specific blackout periods apply when no one can leave.

Further to these leave suggestions, keep in mind that your life situation may change over time. You may be free to concentrate solely on your job now, but personal life priorities can develop quickly. Forming relationships and having children are common changes. Does the contract allow for parental leave? Can you opt to take time off to have a baby or be with your child after the birth? Will your job be there when you want to return to work? Maternity and paternity leave entitlements can vary greatly depending on the company’s jurisdiction and size.

7. Working hours and location

You may have a different understanding of expressions such as ‘full time’ or ‘part-time. Clarify with your potential employer how many hours per week are expected.

  • Will you have regular set hours or a rotating roster?
  • Check if early starts, late finishes or weekend work are required.
  • Is overtime expected? Is it paid or unpaid?
  • Are penalty rates applicable?
  • Are you required to work on public holidays?
  • Is time in lieu applicable? (Where overtime is recorded and traded for a day off later).

Does your company have more than one office? Check to see if you are expected to work from one place or report at different locations within a geographical area. Find out if working remotely (‘from home’) applies to your new role. If travel is a part of the job, investigate if a fuel allowance is payable or if a company car will be provided.

8. Job security

It might be unpleasant to think about, but you must consider the termination clauses in your contract. How can your contract be ended? Some employers are allowed by law to terminate ‘at at will’ or with ‘sole discretion, which means they are not required to consult with you before deciding to let you go. Sometimes the law will dictate notice periods (unless a case of gross misconduct is reported). Examine your contract closely. Some contracts allow for earlier termination even if an end date is specified (and should be). Confirm the details with an employment attorney/lawyer if the wording seems ambiguous.

Also, confirm what can happen if you decide to leave a job before your contracted end date. For example, you may be required to give a specific notice period or agree to forfeit accrued benefits.

9. Moonlighting

A lot of professionals have freelance work on the side these days. It is essential to see if your contract allows for moonlighting if your work is in the same industry. Some companies frown upon this, mainly in potential competition with them. If your additional work is in an unrelated field, there should be less or no issue. Similarly, check for restrictions on intellectual property (for example, content creation, copyright, inventions). What will belong to you, and what will belong to the company? If you are working on side projects at home, disclosing this so the intellectual property details can be excluded from the contract may benefit you.

10. Sale of employer

Another point of clarification: what happens if the company changes ownership? Contracts can become null and void, renegotiating your conditions with a new employer. Sometimes existing contracts are honoured, but it’s not guaranteed. This situation may appear unlikely, but it always pays to be aware of your position.

11. Other restrictions

Check the contract for any other conditions that may be placed on you. These points should be made clear during the hiring process, but it’s essential to be aware of small details. Some employers have strict data protection policies, so you may not take information outside the office. Others (defence contractors and other sensitive employers) restrict employees from bringing mobile phones or cameras onto the premises. You will need to consider these restrictions if you have important reasons to be contacted at work (such as an ill family or the birth of a child).

What is a Good Employment Agreement?

A good employment agreement is practical for both the employee and the company. Therefore, it should not be redundant but should provide specifics about each party’s needs.

A good employment agreement will have clear definitions on parameters such as how much notice an employee must give before resigning, what happens to any outstanding wages if they are unable to work out their notice period, and how much information an employer has to provide before dismissing them.

Summary

It is always worth clarifying the details of the contract. It’s not offensive or inappropriate to do so. Go ahead and ask for more information if you need it. Don’t be afraid to consider the details for a couple of days. Check with a qualified advisor and your relevant labour laws. Taking the time to understand your contract should reduce the chance of a nasty surprise or a misunderstanding later on. You’ll be far more confident walking into your new job and in a stronger position to negotiate when renewing your contract.

Understandably, you may feel excited about being offered a new job, especially if it’s your first step in your career or move to a larger company. Just don’t let the excitement blind you to what is expected from you and how much time off will be required before starting work. Let’s not forget that we want both parties to win when entering an employment contract! Take some deep breaths and read through everything carefully before signing anything. Don’t rush this process because rushing can result in forgetting something important, like whether there are options available for health insurance during the waiting period between jobs. If you have questions at any point, our team would love to help answer them, so please reach

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