An employment contract spells out the conditions of employment including wages, hours, and type of work. Depending upon the level of employment, the responsibility of the new employee, and the nature of the business, the conditions of employment should be detailed regarding the following elements:
- Term of employment.
- Duties of the employee including general and specific responsibilities and performance of duties.
- Compensation including monthly salary, automobile expenses, relocation and moving expenses, and a one-time bonus inducement if used. Details such as bonus or incentive plans, stock options, salary deferment plans, disability benefits, and health and retirement plans may or may not be spelled out.
- Confidentiality required of the employee regarding employer's operating expenses, pricing formulas, procedures, trade secrets, and proprietary information. This confidentiality extends to employee lists, customer lists, or prospective customers who become clients of the organization during the individual's term.
- A non-compete clause.
- Provisions for termination including a violation of responsibility, an inability to perform duties, reorganization, or low company profits. Higher-level employees frequently have a clause included in the contract to state a certain amount of money, often from six to twelve months' salary, that will be paid to the employee in the event of termination by disagreement or dispute.
Any item not covered in the original employment contract falls under common-law rights. Therefore, an employee owns the rights to all ideas, inventions, or discoveries unless he or she was specifically hired to develop those ideas or inventions. If the idea or invention is the incidental result of employment, then the rights belong to the employee unless otherwise specified in the employment contract.