Someone has accepted your offer and you are about to put a contract in front of them. Maybe you downloaded a template from the internet. Maybe a colleague passed on one they used two years ago. Either way, you are looking at a document that will govern the employment relationship until it ends — and you want to know whether each clause is doing what it needs to do, where the drafting choices are, and what goes wrong when this document is handled carelessly.
An employment contract is a private agreement that sits on top of, and cannot undercut, the statutory floor set by the National Employment Standards (NES) under the Fair Work Act 2009 (Cth) and any applicable modern award or enterprise agreement. Where a contract term is less favourable to an employee than the NES or the relevant award, the statutory entitlement prevails. What the contract can and should do is translate those minimum obligations into the practical reality of the role — and add terms that the legislation does not provide at all.
The clauses that carry the load
Position and duties
This clause identifies the job title, the core responsibilities, the reporting line, and the location of work. It sounds administrative, but it is the clause that determines whether you can direct the employee to perform a different task or work at a different site without breaching the contract, and whether a unilateral change to duties later constitutes a repudiation.
Drafting choices:
- Write duties broadly enough to accommodate ordinary business evolution, but specifically enough that performance expectations are clear.
- Include a sentence reserving the right to reasonably vary duties from time to time — this protects you from an argument that any direction outside the listed tasks is an unlawful variation.
- Avoid language like "and any other duties as directed" without limit — courts read such phrases in context of the role described, and catch-all language does not authorise you to redirect a skilled professional into unrelated work.
Type of employment and hours
The clause should state plainly whether the role is permanent full-time, permanent part-time, casual, or fixed-term, and then set the ordinary hours accordingly.
For permanent full-time roles, the NES cap is 38 ordinary hours per week plus reasonable additional hours. The contract should state the 38-hour figure and describe the ordinary span (days and start/finish times). Check whether the applicable award sets a different ordinary-hours span or requires a specific roster structure before you finalise this.
For part-time roles, specify the guaranteed minimum hours and the days they fall on. Without that, you create a casual-in-disguise arrangement that may entitle the employee to casual loading or conversion rights.
For casual roles, state clearly that no guarantee of continuing employment or minimum hours is provided. You must give every new casual employee a copy of the Casual Employment Information Statement (CEIS) as soon as practicable after they start. You must also give the CEIS again at certain service milestones set under the Act.
For fixed-term and maximum-term arrangements, rules that commenced on 6 December 2023 now limit these contracts. The key restrictions are:
- A fixed-term or maximum-term contract (including any extensions or renewals) generally cannot be for a total period longer than two years.
- A contract for the same role generally cannot be renewed more than once.
- Anti-avoidance provisions prevent you from structuring back-to-back arrangements to work around these limits.
- Limited exceptions apply — for example, certain arrangements involving specialised training, genuine project work tied to external funding, or other circumstances specified in the Act. If you believe an exception applies, confirm this with a lawyer before you rely on it.
- You must give every employee on a new fixed-term or maximum-term contract a copy of the Fixed Term Contract Information Statement (FTCIS) when they enter the contract.
Pay, classification, and superannuation
This clause should state the base remuneration, the pay frequency, and — critically — the award classification level if a modern award covers the role. If the award applies, the contract rate must meet or exceed the award minimum for that classification.
Drafting choices:
- If you intend the remuneration to absorb all award entitlements (including penalty rates, loadings, or allowances), you need a clear set-off clause that identifies which entitlements are being absorbed and that the base rate is sufficient to cover them. Vague absorption language does not work — it must be specific enough for the employee to check the arithmetic.
- State the superannuation guarantee rate or, more accurately, refer to whatever rate is required by law from time to time, so the clause does not require amendment each time the legislated rate changes.
- Pay frequency should match what the applicable award requires. Some awards specify weekly or fortnightly payment for particular categories.
Leave entitlements
The NES sets minimum leave entitlements that the contract cannot reduce. The contract clause on leave should:
- Acknowledge the employee's entitlements under the NES (annual leave, personal/carer's leave, compassionate leave, parental leave, and others as applicable).
- Set out any additional leave entitlements you are offering above the NES minimum — for example, additional annual leave days for senior roles or an extra paid day of personal leave.
- Address how leave is to be requested and approved. The NES gives employees certain rights to take leave, but you can set a reasonable procedural framework for requests.
- For part-time employees, confirm that entitlements accrue on a pro-rata basis.
Do not attempt to use the contract to restrict when an employee can take annual leave below what the NES permits. Provisions that require employees to forfeit unused leave at the end of a year, or that cap accruals in a way that is inconsistent with the NES, are ineffective.
Probation
A well-drafted probation clause states the duration, the performance and conduct expectations that apply during the period, and the notice entitlements if the arrangement ends during probation.
Traps to watch for:
- The NES minimum notice periods apply during probation based on the employee's length of service, just as they do after probation ends. A probation clause that purports to reduce notice to nil or to one week without regard to service length is partially ineffective.
- Completing the probation period does not extinguish all obligations — if the employee has worked for you for at least six months (or 12 months if you are a small business employer with fewer than 15 employees at the time of dismissal), they may be eligible to bring an unfair dismissal claim. A probation period does not suspend the Fair Work framework.
- Keep probation to a reasonable length. Three to six months is most common. Very long probation periods attract scrutiny and may not provide the protection you expect.
Policies and the staff handbook
A contract clause that incorporates workplace policies by reference should:
- Identify what policies exist and where they are kept.
- State that those policies may be updated from time to time and that the employee is obliged to comply with them as updated, provided any amendment does not reduce entitlements below the NES or the applicable award.
- Avoid making the policies part of the contract in a way that prevents you from amending them without individual consent. The conventional approach is to make policies binding as directions, not as contractual terms.
Policies worth having in writing from day one include: conduct and performance expectations; work health and safety (WHS); anti-bullying and harassment; IT and social media use; and a grievance process. A staff handbook is the most practical way to bring these together.
Confidentiality and intellectual property
These clauses protect the commercial assets an employee touches during the role. A confidentiality clause identifies the categories of business information the employee must not disclose, and extends that obligation beyond the end of employment. An IP assignment clause vests ownership of work created in the course of employment in the business rather than in the individual who created it.
For more detail on how these clauses work in practice, including the drafting choices and the traps, see our separate guide on employment contract protective clauses.
Restraint of trade
A restraint clause restricts what an employee can do after they leave — typically preventing them from soliciting clients or key staff, or from working for a direct competitor for a defined period in a defined area. Restraints are enforceable only to the extent they are reasonable in scope.
The conventional approach for SMBs:
- Use cascading provisions: draft multiple combinations of duration and geographic scope so that if the widest restraint is unenforceable, the court can apply a narrower version rather than striking the whole clause.
- Tie the restraint to the legitimate interest it protects — client relationships, confidential pricing, key customer knowledge. A restraint that goes further than the legitimate interest is difficult to enforce.
- Tailor the scope to the role. A restraint appropriate for a senior sales manager will look very different from one appropriate for an administrative employee.
Termination and notice
This clause sets out how the employment relationship ends, from either side. It should cover:
- Notice periods: the NES sets minimum notice periods based on continuous service. The contract can and often should provide longer periods, particularly for senior roles, but cannot reduce notice below the NES minimums.
- Payment in lieu: confirm that you may elect to pay out the notice period rather than requiring the employee to work it out, and whether any such payment is calculated on base salary only or on total remuneration including allowances.
- Grounds for summary dismissal: a clause permitting termination without notice (or payment in lieu) for serious misconduct is standard. "Serious misconduct" should be defined or, at a minimum, examples listed — wilful disobedience, fraud, gross negligence, conduct causing serious risk to the business or others.
- Final pay: specify what is included (accrued but untaken annual leave, any other entitlements under the NES or the award) and the timeframe for payment.
For any dismissal related to performance or conduct, follow your policy process: document the concerns, provide the employee an opportunity to respond, and — except for genuine summary dismissal — give appropriate warnings before acting.
Record-keeping and payslips
This is not typically a standalone contract clause, but it underpins every other term. Under ss 535 and 536 of the Fair Work Act 2009 (Cth), you must keep time and wages records for seven years and issue payslips to each employee within one working day of their pay day. Records must accurately reflect actual hours worked, leave taken, and entitlements paid — not what the contract anticipated.
Where your records are inaccurate or absent, the evidentiary burden in any underpayment dispute effectively shifts to you.
Optional clauses worth considering
- Flexibility arrangement: allows agreed variations to award terms (start times, ordinary hours patterns, allowances) in exchange for overall better off outcomes, formalising what Fair Work calls an "individual flexibility arrangement."
- Garden leave: during the notice period, releases the employee from the obligation to attend work while keeping them bound by confidentiality and the employment relationship — useful when client access or competitor risk is high.
- Redundancy consultation: if the applicable award requires consultation before a decision is made (many do), a contract clause can describe how your business will meet that obligation and what process will be followed.
- Location and remote work: where hybrid or remote arrangements are agreed, documenting the agreed location, equipment provision, and reimbursement removes a significant source of ambiguity later.
- Post-employment cooperation: requires the former employee to assist with matters that arise after termination — litigation, handover, regulatory inquiries — within reason and for a defined period.
Where Artificer Legal can help
Employment contracts sit at the intersection of legislation, award conditions, and common law, and most of the problems we see in disputes trace back to documents that were never tailored to the role or the business.
When we review or draft an employment contract, we check the award coverage first — confirming the correct classification, minimum rate, and any award-specific clauses that must be reflected. We then look at the set-off or absorption clause (if any) for the specific and verifiable language needed to make it hold up. We push back on probation clauses that overreach and on termination clauses that misstate NES notice entitlements — both are more common than they should be.
For businesses using fixed-term arrangements, we assess whether the December 2023 restrictions apply, whether any exception is genuinely available, and whether existing templates need to be revised before the next engagement.
If you are starting a new hire, updating an old template, or reviewing a contract handed to you by a counterparty, we can work through it with you, clause by clause, and give you a clear picture of what holds and what doesn't.
The payslip and remuneration trail keeps the contract honest
If we had to identify the single drafting choice that separates employment contracts that work from those that don't, it is the payslip and remuneration trail — not as a contract clause, but as the discipline behind the contract. The contract might say all the right things about salary, loadings, and leave. But if payroll does not match the contract, and the contract does not match the award, you are exposed the moment an employee makes a complaint or the Fair Work Ombudsman audits your records.
Beyond that: make sure your contract reflects how the role actually operates. If someone starts as a casual but works a fixed roster for 12 months, the legal characterisation of that relationship will be examined in light of actual conduct, not just the document they signed. The contract should say what you mean, and your payroll and management practices should be consistent with what the contract says.
Key points covered in this article: an employment contract sets the practical framework above the statutory floor of the NES and modern awards; each clause — from position and duties through to notice and final pay — carries specific legal and operational weight; the December 2023 fixed-term contract restrictions limit most arrangements to two years total with one renewal; probation does not suspend Fair Work obligations; and accurate, seven-year record-keeping is mandatory and shapes who carries the burden of proof in any dispute.