Free Employment Contract Template

A Contract of Employment is a written agreement between an employer and an employee, detailing key elements of their relationship.

This might include the salary that will be paid, benefits like vacation and contributions to retirement accounts, and whether the employee is bound to any agreements of confidentiality (such as an NDA) or non-competition, in addition to other conditions.

Contracts of employment can be known by a number of alternative names, such as:

• Employment contracts
• Employment agreements
• Work contracts
• Job contracts
• Contracts of service
• Service Agreement

Several types of employment, each with different conditions and hours, are suitable for different job roles and company needs.

This will usually include one of the following examples:

• Full-time employment: Full-time jobs are an indefinite working position (i.e. there is no pre-defined end date to it) that usually requires employees to work a full schedule of around 40 hours per week.
• Part-time employment: Part-time jobs are another kind of indefinite work, although they require an employee to work fewer hours per week than a full-time position (usually below 30 hours per week).
• Period or term employment: This kind of employment is usually used for shorter-term projects. Period or term employees are employed for a defined amount of time and most often leave the company once the duration has elapsed.
• Trial period (probationary employment): Most full-time and part-time employment contracts will include a trial period of a few weeks or months to allow both parties to decide if the agreement meets their needs as expected. This allows one side to end the contract early without penalties if it doesn’t live up to its promise.

Statutory Employees: A Special Tax Category

According to the IRS, a statutory employee performs virtually all the services detailed in an enforceable contract but has no major investment interest in the company’s property used to perform those services. Also, this worker performs the services continually for the same employer.

Here are some typical examples of statutory employees:

• Traveling salespeople who work with wholesalers, retailers, contractors, etc., for one company
• Drivers who deliver or pick up laundry, dry cleaning, and food and beverages (not milk) for one company
• Life insurance salespeople who work full-time for one company
• People who work from home (not domestic workers), using company supplies and resources 

An Employment Contract sets clear expectations and responsibilities for both employer and employee by legally binding them together.

The contract provides legal protection for both parties by defining what obligations must be met. It also sets clear and understandable conditions for the relationship to avoid any confusion or misunderstandings about who is responsible for what.

There are a few scenarios where an employment contract should always be done in writing to provide more security and protect your assets.

• Recruiting talent: Use contracts as a powerful recruitment incentive for high-value candidates who prioritize long-term job security.
• Securing key roles: Reserve full employment contracts for your most critical team members to establish security and stability.
• Protecting sensitive assets: Implement contracts when a role requires strong Non-Disclosure Agreements (NDAs) or non-compete clauses, making sure there are clear rules around proprietary information and trade secrets.

Your employment agreement must include essential terms such as employment type and salary.

However, each individual contract is different and will usually be written to allow the conditions to fit the needs of the employer and employee best. The following terms will normally be covered in an employment agreement:

• The names of both parties.
• A description of the employee’s duties.
• The employee’s daily schedule and the hours of work they must fulfill.
• The base salary and any bonus that will be paid.
• The benefits that will be provided.
• Any equity grants.
• Time off like vacation and sick leave.
• Whether the position is in-person, virtual or hybrid.
• What specific hours a person is expected to work.
• Any required background checks or licensing requirements.
• How company expenses will be reimbursed.
• When the contract will end or how it can be legally ended.
• Notice periods for ending the contract early.
• Continuing rights after termination like an extension of health benefits through COBRA.
• The applicable state law that will prevail over the agreement.
• How disputes will be resolved (arbitration is standard).
• Additional employment provisions, such as terms protecting confidentiality information, intellectual property rights, non-compete/non-solicitation obligations, dispute resolution procedures, protection of company data, and mutually agreed indemnification terms.

Write an Employment Contract carefully to ensure it's effective and clear. Use plain English and complete sentences to avoid any confusion.

The main body of the document will be structured into essential sections that outline and explain the main terms of the contract. At the end of the form, it is also possible to add additional clauses and restrictive covenants that place controls on what the employee can and can’t do whilst working under the agreement.

Our step-by-step template customization questions can take you simply through this process. It will help you ensure you don’t miss any important information in your final draft and will help explain each essential element you must add.

Employers and employees often use Employment Contracts to build trust, define their working relationship clearly and clearly define what is expected of each party. However, these agreements don’t work best in every situation.

Some of the most important pros and cons to consider before deciding if this is the right kind of contract for you can be found below.

Employers must withhold federal income tax, Medicare, and social security (FICA), and applicable state/local taxes from employee wages.

They must also pay their share of FICA taxes (6.2% for Social Security and 1.45% for Medicare), federal unemployment tax (FUTA), and state unemployment insurance, unlike with independent contractors. Employers must also comply with state-specific payroll tax requirements.

If you are unsure whether a worker is an independent contractor or employee, you can fill out a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. The IRS will review the circumstances and decide the worker's status.

In the case of employees, employers must report taxes by filing one or more of the following forms:

• Employers who withhold federal income tax, social security or Medicare taxes (including withholding on sick pay and supplemental unemployment benefits): Form 941, Employer's Quarterly Federal Tax Return
• Employers who are filing to report agricultural wages: Form 943, Employer's Annual Federal Tax Return for Agricultural Employees
• Employers who have received written notification about the Form 944 program: Form 944, Employer's Annual Federal Tax Return
• Employers who are filing to report backup withholding: Form 945, Annual Return of Withheld Federal Income Tax

Tax Obligations for Statutory vs. Non-Statutory Employees

Your tax obligations depend on how employees are classified. The table below compares statutory and non-statutory employees.

Seeing a real example of an Employment Contract can help you understand how to structure and write your own. Take a look at our template below for guidance.

Other important forms are essential for business operations. If you need to create another legal document, try one of our expert templates:

• Resignation Letter
• Non Disclosure Agreement (NDA)
• Independent Contractor Agreement
• Service Agreement