Employee Contracts as a Means to Connect with Your Human Resources

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Employee Contracts as a Means to Connect with Your Human Resources

Technological disruptions are sprinting towards workplaces that are struggling sluggishly. There will be a lot of changes to the workplace, and that means employees can expect significant modifications to the styles of working and the terms of engagement with their organization. But employment contracts were always the pillar that balanced the scales of employee capabilities and organization expectations.

Employment contract traditionally defined the roles and duties of the employees, and what the organization expects from them. They defined all the important aspects – compensation, working hours, leaves, and codes of conduct among a lot of other things. In short, employment contracts put on paper what an organization expects from an employee. There is nothing wrong with this approach. It worked from the time of the first industrial revolution.

But, there is a glitch here. Organizations are facing increasing pressure to become highly agile and dynamic, and they realize that they can indeed adapt. The glitch is that employees no longer want the same or expect the same from a job. So, now, employment agreements have become less of an organization’s expectations from the employee and more of what relationship do the employer and employee share.

Now, more than ever, we need dynamic employment contracts because employees have a lot of options available to them. Issues that once defined work etiquettes and blemished CVs no longer seem important. In fact, issues like long notice periods, bonds for serving a company for a period of time, getting clearances from multiple departments are all becoming outdated so fast that they seem petty now. Many blogs you read will tell you why employment agreements are important. They’ll tell you what purposes an employment agreement serves.

But we just established that an employment agreement is only as good as the relationship with the employee is. That means, once you have established working terms of engagement, everything else is documentation. So why do we really need employee agreements?

Each Contract Denotes a Separate Relationship

There are several stages in the employee-employer relation lifecycle. Right from onboarding to employee termination, the nature of the relationship keeps changing. To document each relationship and to legally validate the arrangement, and employee contract is required. For example, some agreements that depict changing relationships are

  • Offer Letter
  • Relocation Agreement
  • Employee Matters Agreement
  • Indemnification Contract
  • Severance and Separation Agreements
  • General Release and Waiver Agreements
  • Technology Transfer Agreement
  • Labor Agreement
  • Secondment Agreement
  • Corporate Travel Agreement

Each of these agreements denotes a unique relationship that does not overlap with the job duties of any other. A lot of rider contracts may be developed to create agreements in conjunction with others, but, in general, each new agreement denotes a unique relationship with the company

They Separate Levels

Several new companies today are advocating for a flat structure where hierarchy doesn’t matter. Traditional organizations relied heavily on various forms of hierarchy. In fact, the concept of levels and hierarchy was so prominent that several experts propounded various theories, concepts, and ideal structures.

Even though today’s startups don’t have conventional hierarchies, they still segregate duties. Traditional levels of management have been eliminated, not job descriptions. These agreements, therefore, are required to establish unique relationships just in terms of the work output expected from them. They create work descriptions for roles like director, manager, supervisor, etc.

While the names might not be there, a broad scope of duties and terms of engagement are defined. This is essential because JDs keep the organization from sinking into chaos. JDs run an organization, and cumulatively, define the organization to third parties. Levels and functions operate together to create a well-oiled machine that is the organization.

Some agreements that pertain to various levels of employees in an organization are

  • Non-Disclosure Agreement
  • Non-Compete Agreement
  • Proprietary Information Agreement
  • Collective Bargaining Agreement
  • Change in Control Agreement
  • Deferred Compensation and Deferred Management agreements for directors

We’ve already established that levels are important. But how would you define the unique relationships within those levels? The answer – Agreements. The ones mentioned are some agreements.

They Help in Retaining Employees

Employees are any company’s most valuable assets. Employees are unlike any other asset. They can’t be moved around or bought and sold at will. However, those employees can move away from you or stick to you, depending on what you have to offer. Even though the average turnover time for employees is 3-5 years, retaining them longer is a great way to improve overall productivity. But employees can’t be enticed with just a good salary. They need other incentives to stay. Several employees have stated that as long as the work is meaningful, they’d work for a lower salary.

In the world of high competition, it is easy for employees to find meaningful work. There are two types of employee markets – talent-differentiated and price-differentiated. A price-differentiated market is where the work is transactional and does not require the application of mental and intellectual faculties beyond a certain point. That ‘certain point’ is available in abundance.

Companies don’t have a dearth of choices when hiring such employees

However, in the case of the talent-differentiated market, it is the buyer’s market. The number of people who are skilled in the changing requirements of the economic landscape is only a handful.

Just paying them a salary will not entice them. They need additional incentives. Some agreements that companies can use to incentivize employees to stay are

  • Employee savings, stock ownership, and stock purchase plans
  • Equity Incentive and accumulation plans
  • Incentive stock options
  • Benefit Plan
  • Pension Equalization Agreement
  • Retirement and Severance plans
  • Bonus Agreements

This is, by no means, a comprehensive list of agreements that organizations can use to entice employees. Each of these agreements creates a fresh relationship and commitment between the company and the employee. However, these agreements can’t create unique relationships because they overlap with over, more basic relationships.