Before you begin hiring employees in Australia, it’s important to understand the unique in-country labor and payroll requirements to ensure compliance for your organization. When it comes to hiring, there are many standard terms that you’ve heard before—things like “employment contracts,” “employment agreements,” and “offer letters.” But in Australia there are key distinctions between employment contracts and employment agreements. Learn how they differ, and which one is right for your business.

What are the key Differences Between Employment Contracts and Agreements?
In Australia, an employment contract is the overall agreement between an employer and an employee. Employment contracts outline the employment terms and conditions, including work hours, salary, and leave entitlements. An employment agreement is more specific, as it identifies the employee duties and is typically used when the employee has a high level of responsibility or the employer wants to include specific job details. The key difference between an employment contract and an employee agreement is that either party can terminate the employment contract, but only an employer can terminate an employment agreement.

All Australian workers must be provided with a set of minimum requirements based on the National Employment Standards (NES) in Australia. They include the following 11 entitlements:
• Maximum weekly hours
• Requests for flexible working arrangements
• Offers and requests to convert from casual to permanent employment
• Parental leave and related entitlements
• Annual leave
• Personal/care leave, compassionate leave and unpaid family and domestic violence leave
• Community service leave
• Long service leave
• Public holidays
• Notice of termination and redundancy pay
• Fair Work Information Statement and Casual Employment Information Statement

Employment agreements can include additional entitlements above what the NES requires but cannot exclude any of the 11 NES entitlements. Employment contracts can be written or verbal, but most companies provide written contracts to avoid any disputes in the future. Employment agreements must be in writing and signed by both employee and employer.

Choosing the Right Employment Documentation for your Business
Employment contracts and employment agreements both have their pros and cons, so it’s important to decide which option is right for your business.

The advantages of employment contracts include:
• Provides clear overview of the terms and conditions of employment
• Sets out the specific duties and responsibilities of an employee
• Can be used to protect confidential information
• Makes it easier to enforce company policies

The disadvantages of employment contracts:
• Can be inflexible and difficult to change
• May not cover all eventualities
• Can be expensive and time-consuming to put together

The advantages of employment agreements:
• Can be more flexible and more accessible to change than an employment contract
• May cover a more comprehensive range of eventualities
• Can be cheaper and quicker to put together

The disadvantages of employment agreements:
• May not give a clear overview of the terms and conditions of employment
• May not set out the specific duties and responsibilities of an employee
• Can be more challenging to enforce company policies

Your organization needs to decide if contracts or agreements are better for your workforce in Australia based on the type of employees you are hiring and the work being done. As employment contracts are legally binding and employment agreements are not, it’s important to identify your needs as an employer before you begin hiring. If you need help with labor compliance and specific in-country requirements, visit Global People Strategist to learn more.