Employment Contracts in the Labor Market

As the operations of a company expand, it will be necessary to employ people to support the work under various arrangements. It is always advisable to spell out the terms and conditions into a contractual agreement. Once this is done, it defines the scope of work and the respective obligations of each other.

In Ghana, where the period of employment exceeds six months, it is a requirement that such a contract be reduced into writing by the parties.

This article examines the requisite terms and conditions that must be included in general employment contracts. It may, however, vary from institutions depending on the nature of business and scope of work for such institutions.

• Contracting Parties

The representative of the company signing all employment agreements must have the requisite capacity and authority to sign for and on behalf of the company. Practically, the Chief Executive Officer (CEO), the Managing Director (MD), or the Human Resource Manager or their nominated persons sign for and on behalf of the company.

• Period/Term of Employment

The employment contract must have a date of commencement. However, depending on the scope of work of the employee, the period of employment may have a specific timeline or otherwise. Where the period of employment is specific, it terminates automatically at the end of the period unless the same is renewed by the parties.

Practically, most companies limit the term to six months (probationary period) with the option to confirm after the probationary period on condition that they are satisfied with the employee.

• Scope of Work/Duties of Parties

The contract of employment must define the obligations and duties of both the employer and employee. It usually indicates the expectations of the employer, the place of work, designation of the employer, job title, hours of work, and any other obligations expected from the employee by the employer.

The scope of work usually contains statements that require the employee to abide by all company policies and procedures and a commitment to diligently work for the company during the period of employment.

The scope of work is critical as it is used as the basis for an employee to determine the employee’s capabilities.

• Salary/Financial Commitments

The contract of employment must clearly state the gross (without any deductions) and net (after all taxes and deductions) which the employee will be entitled based on the arrangements.

Where there are other benefits and allowances which may include health insurance, accommodation, transportation, travel allowances among other things, the same must be included in the agreement. Practically, most contracts of employment include clauses that have an effect that all expenses incurred by the employee in the course of the employment shall be reimbursed subject to the production of a receipt.

• Annual Leave/ Holiday entitlement

The contract of employment must indicate the number of annual leave days the employee is entitled. Legally, the minimum number of days in a calendar year should not be less than fifteen (15) days. It is worthy to note that during the period of leave days, the employee will still be paid the salary.

Employers must note that the annual leave must not be interrupted. That notwithstanding, if for any emergency reason the employee is required back to come back to work, the employee can be recalled on condition that the leave will be taken at a later date.

Practically, to assist management to properly plan leave days and ensure no interruption of work, most employment contracts include clauses that notice of any intended annual leave should be given between two weeks and one month before the due date.

• Confidentiality Clause

The contract of employment must include a confidentiality clause restricting the employee from disclosing any corporate information to third parties without consent. The information may relate to trade secrets, corporate information, finance, technical data, and know-how among other things.

This clause is important and a breach is likely to warrant termination in most companies.

• Termination Clause

The termination clause in a contract of employment is necessary as it defines the procedures to be taken by both the employer and employee should any of them decide to withdraw from the contract. Legally, termination can be by mutual agreement between the employer and employee, by the worker on grounds of ill-treatment or sexual harassment, where the employee is found on medical examination to be unfit for employment.

The law requires notices of termination to be included per the under listed details;

• Where the contract of employment is more than three years, one-month notice or one month pay in lieu of notice
• Where the contract of employment is less than three years, two weeks’ notice or two weeks’ pay in lieu of notice
• In case of weekly contract, seven days’ notice.

Practically, most contracts of employment go a step further to include the obligations of parties after any termination. This may include the return of all company assets, records, correspondence within a specific period, undergoing medical exit examination among other things.

• Other Clauses

The contract of employment must include a clause on disciplinary and grievance procedures, address to which all notices are to be sent to both the employer and employee, whether the company has the right to assign its obligations in the contract among other things.

In conclusion, it is necessary to reduce the agreed terms and conditions between the employer and employee into writing. This helps all parties to know their obligations and limitations in the course of their dealings with each other.