There’s no denying that a company’s HR plays a pivotal role in ensuring that a company’s workforce aligns with its business model. Besides hiring and staffing, HR is also in charge of organizing and managing employment contracts and other important legal documents like stock option agreements, contract variation letters, disciplinary procedures, and non-disclosure agreements (NDAs). In doing so, the HR department plays an integral role in protecting the interests of the business so that it runs successfully presently and in the future.
If you’re starting out as a recruiter or looking to advance your career in HR, you can use this guide to learn the basics of HR contract management.
How to create HR contracts?
An employment contract isn’t just a legally binding agreement between an employee and an employer. Far from it! Well-written HR contracts are the bedrock of any organization, as they explicitly state the expectations for either party and prevent bottlenecks in the recruitment process.
Before you get down to writing an employment contract for your company, here are some suggestions to consider:
Title your employment contract clearly so the individual reading it and signing it knows what they agree to. “Employment Agreement” or “[Your Business Name] Employment Contract” are a few examples.
Names of Parties Involved
Begin the contract by writing the full names (without any abbreviations) of both your company name and the prospective employees to avoid confusion. For brevity, assign name references to them. For example, you can write: This employment agreement is by and between XYZ Corp. (hereafter referred to as “the Employer”) and Andrew Bakefield (“the Employee”).
Some state and federal governments regulate minimum labor wages, work hours, and severance pay to protect employees’ rights. Read up on your state’s employment laws to ensure you’re fully legally compliant. You have complete discretion over all other terms and conditions beyond those required by law. Here are a few examples:
- Probationary period
- Overtime pay
- Notice periods
- Compensation package
- Medical coverage
- Paid time off
- Team lunch
- Fuel allowance
- Work-from-home stipend
- Performance bonus/awards
- Employee wellness
- Training & development
- College debt relief
- Retirement/pension plans
Write a detailed breakdown of duties to ensure the prospective employee understands what is required of them in their new role. However, use language they can understand. You don’t want to see your new hire squint through unnecessary legal jargon. Also, avoid sarcasm and irony. Be formal, yet respectful.
Lastly, don’t forget to mention essential but often overlooked details. They can include:
- Effective date
- Employment type (full-time, part-time, fixed-term, casual)
- Names of line manager and one-up manager
- Payment cycle
- Performance appraisal period
How to manage HR contracts
After drafting an employment agreement, the next logical stage in the HR contract management process is to get upper management’s approval. Once you have their go-ahead, you can send the contract to the prospective employee for a final sign-off indicating their acceptance of your job offer. But your job doesn’t end here!
During the post-signature stage, you’ll often find yourself doing the following routine tasks:
- Collecting and storing any relevant paperwork related to the contract
- Scheduling reminders for important dates related to the contracts, such as joining dates, end dates for probation and notice periods, and expiration dates in case of a fixed-term contract
- Tracking important KPIs like average hiring time, cost per hire, interview-to-offer ratio, sourcing channel efficiency, offer acceptance rate, rejection rate, diversity ratio, quality of hire, retention rate, etc.
- Auditing a contract’s compliance and revising the original draft if needed
- Renegotiating terms of a contract if it’s causing problems for the company or the employee.
How to automate HR contracts
Fortunately, contract automation allows progressive companies to manage HR contracts entirely online. This is what an automated process looks like:
- Creation: Create master documents, including offer letters and contracts, using templates pre-approved by HR and legal experts.
- Internal Approval: Set up an approval workflow so that only the person in charge signs off on all sent contracts.
- Revision: Quickly update agreements using pre-existing templates.
- Collaboration: Get real-time visibility into the version history and add your input.
- Negotiation: Allow a potential employee to negotiate a contract without leaving the browser.
- Signing: Have them sign their contracts electronically through a digital signature.
- Notifications & Alerts: Set custom date reminders for important tasks and events in an HR contract’s lifecycle.
- Tracking & Reporting: Monitor key recruiting metrics using graphical dashboards and generate custom reports.
- Document Storage: Organize and store all pertinent documents and confidential data in a central repository with granular permission controls for multiple layers of security.
- Compliance Audit: Ensure your contracts follow all relevant laws, regulations, and standards.
- ATS Integrations: Integrate your contract management software with an applicant tracking system (ATS) so that all HR-related information is always accurate and up-to-date.
Before you rush into HR contract automation, you should take stock of your company’s present HR contract management procedures. This will help you identify pain points and problem areas that can be addressed through automation. It is also a great time to review existing HR contracts and revise them as needed to reflect the current business climate and legal requirements.
Qurat-ul-Ain Ghazali, aka Annie, is the growth manager at Contractbook and looks after all the organic channels. She has been with tech startups and scaleups for a couple of years with a B2B focus. You can find her socializing, traveling, indulging in extreme sports, and enjoying the local desserts when she is not working.