Business readiness

Employee Agreements

What are Employee Agreements?

Agreements that document the terms upon which each employee has been engaged by the company.

While most companies have contracts with their employees, many do not. And those that do, often have contracts that do not provide the full comfort for both parties that they should. Having comprehensive documentation of your employment arrangements involves:

  • Ensuring your arrangements with employees are documented in formal contracts
  • Ensuring these contracts accurately reflect the individual arrangements in place between your company and each employee
  • Ensuring these contracts contain all necessary protections for both the employee and the company

Why are Employee Agreements important for business today?

Comprehensive employment contracts provide the following benefits for your business by providing clear expectations to your and your employees as well as reducing risks to your business by covering such issues as:

  • The minimum expectations in terms of attendance and performance
  • The length of the probation period
  • Notice periods for termination
  • Severance packages
  • Protection of company intellectual property
  • Rules against competing directly against the company post departure
  • Rules against poaching employees post departure

Why are Employee Agreements important for an event tomorrow?

Having employee arrangements appropriately documented in contracts helps reduce risk for new investors into your business because:

  • Having contracts for employees enables investors to ensure forecast employee expenses align with the terms of the current contracts
  • Knowing the standard terms of employment contracts at the company provides comfort of the general terms under which employees are engaged and what risks have been reduced for these businesses as a result of these terms

Knowing the precise terms of individuals’ contracts is obviously very sensitive and therefore needs to be carefully managed Often the precise terms of employment contracts are withheld from potential acquirers due to their confidentiality but are sometimes provided to bidders as part of a black box process. This means highly sensitive information is provided under strict confidentiality rules and only to the preferred party when all other terms of the deal have been agreed.

Pros of addressing Employee Agreements

  • Reduced attendance problems
  • Reduced performance problems
  • Reduced risk of intellectual property theft by employees
  • Reduced poaching of employees by ex-staff

Cons of not addressing this topic

  • Increased absenteeism
  • Increased performance problems
  • Greater business disruption from employees leaving the business
  • Potential loss of business strategic advantage due to intellectual property theft
  • Loss of top employee talent as a result of poaching

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