It is. not just a procedural document, but a protective shield that defines mutual rights and obligations, ensures a fair and stable working environment. Omission of the details of this contract may lead to disputes and serious legal and financial losses.
So, both parties should pay close attention to five basic items that are possible points of disagreement in any business relationship:
1. The nature of the contract and its duration: specific or indefinite
This clause determines how the contractual relationship ends and the consequent damages.
- Fixed-term contract: ends automatically with the expiration of its agreed term. If it was terminated prematurely by the employer without a legitimate reason, the worker is entitled to compensation for the remaining term of the contract.
- The contract is indefinite: it is not tied to a certain period of time and ends with the termination of the contract by one of the parties on prior notice. Compensation for arbitrary dismissal in this type of contract is governed by law (most often it is calculated based on years of Service and remuneration).
Tip: pay attention to the conditions of implicit renewal. in many legislations, if a worker continues to work after the expiration of a fixed-term contract without explicit renewal, the contract automatically turns into an indefinite one.
2. Remuneration, benefits and compensation
The remuneration item should be clear and transparent and include all the worker’s financial accruals.
- Definition of universal remuneration: make sure that the contract separates the basic wage and fixed allowances (housing allowance, transport, etc.). Comprehensive remuneration should include everything that a worker is paid for his work.
- Deductions and sanctions: the contract should clearly specify the ceiling of legally permissible deductions and disciplinary sanctions that can be imposed. These items must comply with the maximum limits established by the labor code.
- In-kind benefits:any non-cash benefits (e.g. health insurance, gym subscription) must be clearly documented to avoid any dispute about their entitlement or value.
3. Holidays and overtime hours
This item determines the work-life balance (Work-Life Balance) and protects the worker from burnout.
- Legal limit of working hours: the number of daily and weekly working hours stated in the contract must correspond to the maximum allowed by law.
- Overtime calculation: the contract must specify how overtime pay is calculated for working hours that exceed the official hours, provided that the percentage is not less than the legal minimum (usually 125% or 150% of the basic hourly wage).
- Leave rights: confirm the details of the entitlement to paid annual leave, how it is transferred or liquidated, as well as the conditions for sick, maternity and emergency leave.
4. Competition and confidentiality clause (Non-Compete and NDA)
These two clauses protect the business interests of the employer, but they must be formulated fairly.
- Non-disclosure agreement (NDA): obliges the worker not to leak or use any confidential or commercial information of the company. The clause must be clear on what is considered ‘secret’.
- Non-Compete clause: prevents the worker from working for a competitor or establishing a competing business after the termination of the contract. In order for this requirement to be legally effective, it must be limited by reasonable conditions, the main of which are:
- Reasonable geographical range.
- The specified period of time(usually does not exceed one or two years).
- The type of activity that the worker is prohibited from practicing.
- Intellectual property: the contract must make it clear that any innovations, programs or content produced by the worker during or because of work, are owned by the company.
5. Terms of termination of the contract and severance pay
The contract should clearly specify the procedure for termination of the contractual relationship by the parties.
- Advance notice (Notice Period): specifying the period of time that either party must notify the other before terminating the contract, and this period must be in accordance with the law.
- Lawful dismissal: the contract must contain an indication of the specific reasons that allow the employer to dismiss without notice or compensation (such as cases of assault, disclosure of secrets, frequent absences), and these reasons must be stipulated in the labor code.
- End-of-Service bonus: confirmation of the worker’s right to this bonus and how it is calculated (often based on years of Service and the last pay). This right may not be waived in advance.
Conclusion
An employment contract should be perceived as a partnership contract and not just dictate terms. Reading the contract carefully and with legal awareness protects against future disputes. Hiringa specialized lawyer to review the contract before signing is extremely important, he ensures that the terms of the contract are fair, enforceable, and do not violate binding labor law provisions.
