What to Include in an Australian Employment Agreement

Hiring your first employee (or your fiftieth) is an exciting milestone. It usually means your business is growing, there’s more work coming in, and you’re ready to build a team.

But it also comes with a big shift in risk. When you bring someone on, you’re no longer just managing customers and suppliers - you’re managing legal obligations under Australian employment law, workplace policies, and (often) a Modern Award.

That’s where it helps to understand the meaning of an employment agreement in an Australian context.

In this guide, we’ll walk through what an employment agreement is, why it matters for small businesses and startups, what you should include, and how to avoid common mistakes that can cause disputes later.

What Is An Employment Agreement In Australia?

In plain English, an employment agreement is the contract between you (the employer) and the person you hire (the employee).

It sets out the terms of the working relationship - things like:

• what work they’ll do;
• how much you’ll pay them;
• their hours and location of work;
• leave and other entitlements;
• confidentiality and intellectual property (IP) expectations; and
• how the employment can end.

In Australia, an employment agreement can be:

• written (best practice, and what most businesses use);
• oral (possible, but risky because it’s hard to prove what was agreed); or
• partly written and partly oral (common when people “start next week” and the paperwork follows later).

Even if you don’t give someone a written employment agreement, you can still end up with a legally enforceable employment contract based on what you’ve said, what you’ve paid, and how you’ve treated them.

For most small businesses, a well-drafted written agreement is the simplest way to protect your business and set expectations clearly from day one.

Employment Agreement vs Award vs Enterprise Agreement (What’s The Difference?)

This is where many employers get confused - especially startups hiring quickly.

• Employment agreement: the individual contract you agree with your employee.
• Modern Award: a legal instrument that sets minimum pay rates and conditions for certain industries/roles (for example, hospitality, retail, admin, etc.). Awards can apply even if you don’t mention them in the contract.
• Enterprise agreement: a separate agreement (usually negotiated for a business or workplace) that can replace an Award if approved and compliant.

A key rule to remember: your employment agreement can’t provide less than the minimum legal standards in the National Employment Standards (NES) and any applicable Award or enterprise agreement.

Why Your Employment Agreement Matters (Even If You Trust Your Team)

Most employment relationships start out positive. You’ve found someone capable, they’re excited about the role, and you want to get on with running the business.

But employment issues rarely happen because people plan for them - they happen because expectations aren’t clear, or because circumstances change (a restructure, poor performance, a disagreement about pay, or someone leaving suddenly).

A properly drafted employment agreement helps you:

• set clear expectations about duties, reporting lines, hours, and workplace behaviour;
• reduce the risk of disputes about pay, leave, notice, or performance issues;
• protect confidential information (customer lists, pricing, product roadmaps, business strategies);
• clarify ownership of IP created during employment (important for startups building products, software, content, or brand assets);
• manage exit risk when someone resigns or you need to end the employment; and
• stay compliant with employment law requirements from the start.

It’s also a professionalism signal. Having written agreements in place often improves onboarding and reduces awkward “but I thought…” conversations later.

What Should An Employment Agreement Include For Small Businesses?

There’s no one-size-fits-all contract that works for every role. A café manager, a senior engineer, and a part-time admin assistant will require different terms.

That said, most strong employment agreements for small businesses and startups will cover the following.

1. Parties, Role And Start Date

This section identifies the employer and the employee, the position title, and when employment starts.

You can also describe the role more broadly (so you’re not locked into a narrow set of tasks). Startups especially benefit from wording that reflects changing priorities.

2. Employment Type (Full-Time, Part-Time Or Casual)

This is critical. Misclassifying workers is one of the most common (and expensive) employment mistakes.

• Full-time: ongoing work with a standard full-time pattern (often 38 hours per week, but Awards can shape this).
• Part-time: ongoing work with fewer hours, usually with a regular pattern agreed in writing.
• Casual: no firm advance commitment to ongoing work, typically with casual loading instead of paid leave.

If you’re not sure which category fits, it’s worth getting advice before you issue the contract - fixing it later can be difficult.

Many businesses use a tailored Employment Contract rather than adapting a generic template, because small details (like hours, flexibility, and Award coverage) can make a big difference.

3. Pay, Superannuation And Other Benefits

Your employment agreement should clearly set out:

• base rate of pay (hourly or salary);
• when and how the employee is paid;
• any bonuses/commissions (and the rules around them);
• superannuation (and whether figures are inclusive or exclusive of super); and
• any other benefits (car allowance, phone allowance, training budget, etc.).

If your employee is Award-covered, you’ll also need to ensure the total package meets Award minimums, including penalty rates, loadings, allowances, and overtime.

4. Hours Of Work, Location And Flexibility

This section covers ordinary hours, reasonable additional hours, rostering expectations (if relevant), and where the work is performed (office, remote, hybrid, multiple sites).

If your team works remotely or uses personal devices, it’s a good idea to back your agreement up with a workplace policy framework that explains practical rules (security, confidentiality, acceptable use, and so on).

5. Leave And Other Entitlements

Most employment agreements will reference leave entitlements under the NES (and any relevant Award), including annual leave, personal/carer’s leave, compassionate leave, parental leave, and long service leave (state-based rules apply).

Rather than trying to rewrite the law in the contract, many employers keep this section clear and accurate, and ensure payroll practices align with what’s required.

6. Probation

Probation clauses are common, particularly for startups hiring into new roles.

Probation lets you assess fit, performance, and capability early on. But it’s important to understand that probation doesn’t remove all employee rights - and you still need to follow fair, lawful processes (especially if the employee raises issues like discrimination or adverse action).

7. Confidentiality And Privacy

Even junior team members can access sensitive information. A confidentiality clause helps protect your business if someone leaves and tries to take information with them.

If your business handles personal information (for example, customer databases, health information, or employee records), you may also need a strong privacy compliance setup, including a Privacy Policy where required.

8. Intellectual Property (IP) Ownership

For startups, this is often the most overlooked section - and one of the most important.

In many cases, IP created by an employee in the course of their employment will belong to the employer under Australian law. However, because the position can depend on the circumstances (and because founders and investors usually want clear certainty), it’s best to set this out expressly in the employment agreement.

Your agreement should be clear about:

• what IP is created “in the course of employment”;
• who owns it;
• whether the employee must assist to formalise ownership (for example, signing documents); and
• how moral rights (for creative works) are handled where relevant.

9. Policies And Workplace Rules

Many businesses include a clause requiring employees to comply with workplace policies. Policies might cover:

• code of conduct;
• work health and safety;
• leave processes;
• IT and device use;
• social media;
• anti-bullying, discrimination, and harassment; and
• disciplinary processes.

Policies work best when they support (not contradict) the employment agreement.

10. Termination, Notice And Final Pay

This section should set out how employment can end, including notice periods and any payment in lieu of notice if applicable.

It’s also a good place to confirm obligations on exit - like returning company property, maintaining confidentiality, and finalising handover tasks.

If you’re considering paying someone out rather than having them work their notice, it’s important to get the mechanics right, including how you calculate entitlements and whether super applies. Many employers also want clarity on payment in lieu of notice before using it in practice.

Common Mistakes Small Businesses Make With Employment Agreements

Even well-intentioned employers can run into trouble with employment paperwork - especially when hiring happens quickly, or when you’ve borrowed a template from a friend or the internet.

Here are some of the most common issues we see.

Using A Generic Template That Doesn’t Match Your Business

Templates often miss key details that matter in real life: Award coverage, flexible duties, IP ownership, confidentiality scope, remote work, or specific policies you need staff to follow.

They also sometimes include clauses that look “standard” but aren’t enforceable (or create unintended obligations).

Getting Casual Employment Wrong

Casual employment is a common setup for hospitality, retail, events, and early-stage businesses managing cash flow.

But casual roles still have rules. If your casual employee has regular hours and a firm ongoing commitment, they may be able to argue they were not truly a casual employee, depending on the facts and the applicable industrial instrument.

This can lead to disputes and potential claims, including allegations of underpayment or incorrect entitlements. The risk will depend on the circumstances (including how they were engaged, what they were paid, and what Award or agreement applies).

Confusing Contractors With Employees

This article focuses on employment agreements - but many startups also engage contractors.

If someone is really an employee (based on the working relationship), using a contractor agreement won’t necessarily protect you. You could still owe employee entitlements and face penalties.

If you’re hiring contractors as well as employees, it’s worth getting both arrangements reviewed to ensure they match how your business operates in practice.

Not Thinking About IP And Confidentiality Early Enough

Once an employee leaves (or a dispute starts), it’s much harder to negotiate strong protections.

Putting IP and confidentiality terms in place from day one is typically simpler, clearer, and more enforceable - especially where the employee’s role is directly tied to building your product or brand.

Relying On Verbal Promises

Verbal agreements can be enforceable, and they often create messy disputes. If your employee believes you promised a pay rise after three months, or “guaranteed” certain hours, that conversation can become evidence later.

A written employment agreement helps align everyone’s understanding.

How Employment Agreements Fit Into Your Broader Legal Setup

An employment agreement is a key legal document - but it works best as part of a complete business foundation.

Depending on where your business is at, it’s also worth thinking about:

• Business structure: if you’re scaling, a company structure can help manage risk and governance. If you’ve already set up a company, having a Company Constitution can help clarify internal rules.
• Founder arrangements: if you have co-founders, decision-making and exits can become complicated quickly without a Shareholders Agreement in place.
• Customer terms: if you sell online or provide services, clear Business Terms can reduce refund, scope, and payment disputes.

Putting these documents together doesn’t have to be overwhelming. The goal is to build a system that supports growth - so you can hire with confidence and reduce surprises later.

Key Takeaways

• The meaning of an employment agreement is simple: it’s the contract that sets the rules for the working relationship between you and your employee.
• Even if you don’t have a written agreement, you can still have legal obligations - which is why written agreements are usually the safest option for small businesses.
• An employment agreement can’t undercut the National Employment Standards (NES) or any applicable Modern Award or enterprise agreement.
• Strong agreements usually cover pay, employment type, hours, leave, probation, confidentiality, IP ownership, policies, and termination processes.
• Common mistakes include using generic templates, misclassifying casuals, confusing contractors with employees, and failing to protect IP and confidential information early.
• Employment agreements work best as part of a broader legal setup that supports hiring, growth, and risk management.

This article is general information only and isn’t legal advice. If you’d like help putting the right Employment Agreement in place for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.