When you hire a new employee, it is good business practice to offer them a contract.
A contract of employment can be verbal, or it can be written. Where most small businesses run into trouble is in their reliance on verbal agreements, opting not to use written employment contracts. This is problematic because verbal agreements create room for misunderstanding and disputes in employee relations.
Written employment contracts ensure that both you and your employee have a clear understanding of your rights and obligations during the term of the contract. This reduces the scope for misunderstanding and disputes.
What is an Employment Contract?
An employment contract is a legally binding agreement between an employer and an employee in which the terms and conditions of employment are outlined. Whilst an employment contract can be verbal or written, written contracts create clarity about rights and responsibilities and helps to ensure that the employer’s interests are protected, and the employee is fairly treated.
1The Ghana Labour Act 2003 requires that where the period of employment is more than an aggregate period of six (6) months in the year, the employment must be secured by a written contract.
When must a written employment contract be issued?
An employment contract should, preferably, be issued before the employee commences work.
2Where the employment contract is not issued when the worker starts work, the Labour Act requires that within two (2) months of employment, the employer should furnish the worker with a written statement of the main terms of the contract.
What are the Basic Elements of an Employment Contract?
Generally, an employment contract should be in writing, and it should clearly spell out the following basic elements:
- The full name and address of the employer.
- The full name and address of the employee.
- Duration of the contract.
- The position and grade.
- The job requirements and the duties it entails.
- The place and hours of employment.
- Compensation and benefits, including leave entitlements and pension benefits.
- Deductions to be made from employee’s remuneration.
- Grievance resolution and disciplinary procedures.
- Termination clauses detailing severance terms.
- A clause making the employer’s general employee policies applicable to the employee.
3The above covers the minimum terms that must be included in a contract of employment under the Ghana Labour Act, 2003.
A written employment contract is a vital tool in managing an employment relationship as it creates clarity, and reduces the scope for dispute and misunderstanding.
It also protects the rights of both the employer and the employee. And it fulfils the employer’s obligation to issue a written employment contract when the period of employment is more than 6 months in a year.
Written employment contracts are there to protect you; use them, or face the consequences.
Written by Marian Botchway and Alex Dsane
Marian is an associate in the payroll unit of SCG and Alex is a senior manager responsible for the payroll unit.
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1 Ghana Labour Act 2003, Act 861 section 12(1).
2 Ghana Labour Act 2003, Act 861 section 13
3 Ghana Labour Act, 2003 Act 861 Schedule 1