Employment Contracts in Australia: What Must Be Included

Why employment contracts matter

An employment contract is the foundation of the employment relationship. It sets out the terms on which someone is employed, protects the business in the event of a dispute, and — when drafted properly — gives both parties clarity about their rights and obligations.

Many Australian businesses use contracts that are outdated, incomplete, or simply not fit for purpose. A contract that was drafted ten years ago may not reflect current award rates, modern employment law, or the actual nature of the role. A contract that's been copied from the internet may contain clauses that are unenforceable or that create unintended obligations.

What must be in every employment contract

Every Australian employment contract should clearly identify the parties — the employer's legal entity and the employee — and specify the commencement date and whether the employment is ongoing, fixed-term, or casual. Getting the employment type right matters: casual employees have different entitlements to permanent employees, and misclassification can create significant back-pay exposure.

The contract should specify the role, the primary duties, and the reporting structure. It should state the remuneration — base salary or hourly rate, and any additional components such as superannuation, allowances, or bonuses — and confirm whether the remuneration satisfies the applicable modern award or enterprise agreement.

Hours of work should be addressed: whether the employee is full-time, part-time, or casual, and what the ordinary hours of work are. For part-time employees, the guaranteed minimum hours should be specified. For casual employees, the contract should reflect the casual nature of the engagement and include the casual loading.

Leave entitlements should be referenced — not necessarily set out in full, but the contract should confirm that the employee is entitled to leave in accordance with the National Employment Standards and any applicable award. Confidentiality and intellectual property clauses are important for most roles, and restraint of trade clauses should be included where appropriate — though these need to be carefully drafted to be enforceable.

Common contract mistakes

One of the most common mistakes is using a contract that doesn't correctly identify the applicable modern award — or that attempts to contract out of award entitlements. You cannot contract out of the National Employment Standards or modern award minimum entitlements, and a contract that purports to do so is unenforceable to that extent.

Another common issue is salary absorption clauses — clauses that purport to absorb all award entitlements into a flat salary. These clauses can be effective, but they need to be drafted carefully and the salary needs to be genuinely above-award to work as intended. A poorly drafted absorption clause can leave the business exposed to claims for unpaid award entitlements.

Restraint of trade clauses are frequently drafted too broadly to be enforceable. Australian courts will not enforce a restraint that goes beyond what is reasonably necessary to protect a legitimate business interest. A restraint that prevents a former employee from working in their industry for two years across the whole of Australia is unlikely to be enforced.

Keeping contracts current

Employment contracts should be reviewed periodically — particularly when an employee's role changes significantly, when the business structure changes, or when there are significant changes to the applicable award or employment legislation. A contract that accurately reflected the employment relationship five years ago may no longer do so.

HR Anchor's HR Compliance & Contracts service covers employment contract review, drafting, and updating. If you're not confident that your current contracts are fit for purpose, we can review them and provide clear advice on what needs to change.