Employment Contract Guidelines – 6 Essentials You Need To Know

Employment Contract Structure and Guidelines

employment contract

Establishing a new business or start-up comes with its own challenges and responsibilities. If you own a startup, you can tell how tricky it gets to hire employees. Not only are you competing with the giants of your realm, but you are also looking to hire quality employees. A person wants to be a part of a company that provides clarity and, at minimum, is legitimate and professional in terms of employment contract. 

Statistically, more than 50% of potential employees back down at the last moment if they find a job agreement shabby or poorly framed. After all, a working contract defines the terms of employment. A potential employee will always imagine their life in your company based on the job offer letter. 

This article will make sure that every person you send an employment agreement will join your organization with no doubt in their minds. So, let’s get started!  

Also, just in case if you are curious to understand the process of how to write a job proposal, we have got you covered.

How to Make a Perfect Employment Contract?

A perfect employment letter covers almost everything in establishing clear terms for employees to work in your organization. 

Before we get started, it is essential to understand that legal guidelines for job contact differ from one state to another. Therefore, make sure to look at the labor laws of The United States for a better understanding. 

Now, let’s begin with the employment contract format, commonly known as an employer and employee agreement. 

  1. Introduction 
  2. Scope and Duties of the Job 
  3. Employment Salary and Incentives 
  4. Terms and Regulations of Employment 
  5. Miscellaneous Guidelines 
  6. Sign-Off Page


The job contract letter will start with an introduction, which includes what the agreement is about. 

For example, this Employment letter is effective from (this date) and is between (Employee Name) and ( Name of your company).

Scope and Duties of the Job

This clause of the employment document basically contains three sections. 

Job Position 

You have to include the roles and responsibilities of your potential candidate here. 

Commitment Towards the Company 

You will define terms such as your potential employee being unable to work or serve another person or company during his tenure in your company. Consider this section to define the employee’s work obligations in your company. 

No Conflicting Commitments

Here, in the employee contract, you will define that the employee cannot do certain things, such as publicizing confidential information or helping your competitors. It is basically an action that ensures the employee does not have any ties to other companies of any unprofessional nature. 

Employment Salary and Incentives

In this section of the employment contract, you will define sections such as salary, insurance, incentives, reimbursements, and vacation options provided by your company. Basically, explain what the financial perks are of being in your company. 

  • Salary

Here, defines the base salary of your employee on an annual or semi-annual basis. Also, if the employment tenure is pre-defined, you may specify the complete base salary for every period of the tenure. 

  • Bonus

State the number of various bonuses such as signing bonuses & annual bonuses, and performance bonuses specific to the employment category. 

  • Insurance Policy & reimbursements 

Include the type of insurance coverage you provide and the terms of reimbursement. You can also define if your company sponsors a specific health program other than or against standard insurance coverage. 

  • Companies Stock(if applicable)

You can enlist the terms and limits of employees for purchasing the company’s stocks under this section. 

  • Leave Policy

Explain the terms and conditions of paid, unpaid, or sick leaves entitled to the employee annually or monthly.

Terms and Regulations of Employment

  • Resignation Policy 

You have to mention the applicable resignation terms that employees must follow if they want to resign from the company.

  • Notice Period 

You must clearly state the notice period timeline in the employment contract that employees must serve if they wish to resign from their designation. 

  • Severance Pay

Here, you have to define the compensation given to an employee in case your organization terminates their tenure for various reasons.

Miscellaneous Guidelines

Every organization has some specific rules and regulations that are applicable for compliance by every employee; you have to mention all such guidelines in this section.

Sign-Off Page

At last, comes the space for signing off the letter by the employee and the person from your organization with this given authority.

Which software should you use to make an employment contract?

Try software that enables you to make a job contract document effortlessly. Only some software in the market has exceptional features that allow you to dive into your creative zone completely. 

Praised by renowned editors, x.doc is simply for individuals who are looking for nothing but top-notch performance. Experience your free trial and truly enjoy designing employment contracts and other business proposals.


As per the latest labor laws in the USA, if you own a company,  then know that you are liable to give a minimum of two weeks’ notice in case of an employee’s employment termination.

You should go for software that are quick and relatively easy to use. Choose a software that is equipped with relevant features that make designing a job letter a piece of cake. Try x.doc, as it has every feature possible to ensure a hassle-free document experience. With x.doc, you also get access to dynamic templates for business proposals, which can be further curated as you desire.

An introductory job offer letter must contain sections for the job role, leave policy, salary, reimbursements, and resignation policy as well.

Sahil Dhingra
Sahil Dhingra
A software developer, business analyst & people’s manager, Sahil Dhingra has over 10 years of experience working for tech giants such as Apple, HP, and Cisco. With his deep understanding of the Software Development Life Cycle, Sahil strives to expand the horizon for SaaS-based products for AV professionals while also implementing the latest technologies such as AI, ML, VR, and Blockchain.

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