How to Draft Employment Agreements in Australia: A Practical Guide for Startup Founders
- Rachel. M
- Sep 22
- 7 min read
Updated: Nov 6
When you hire your first employee, it’s more than just payroll and paperwork — it’s about setting expectations, protecting your business, and building trust. That starts with a legally sound employment agreement.
In Australia, employment contracts are a legal requirement backed by the Fair Work Act 2009. If you’re not following the rules, you risk fines, disputes, or unfair dismissal claims. But done right, they become the foundation of a transparent and compliant team culture.
As a founder, you don’t need to become an employment lawyer — but you do need to understand the essentials. This guide breaks down what really matters so you can draft your first employment agreement with clarity and confidence, and have smarter, faster conversations with your legal team.
What Is an Employment Agreement?
An employment agreement is a written contract between you and your employee that outlines the terms and conditions of their employment.
In Australia, it must comply with:
The Fair Work Act 2009
Any applicable Modern Award or Enterprise Agreement
The National Employment Standards (NES)
It’s not enough to have a handshake deal or verbal agreement. If there’s ever a dispute, the written contract becomes your safety net.
Mentor Tip: should you come to a verbal agreement with an employee, make sure you follow it up in an email which evidences the agreement in writing.
Why a Solid Employment Agreement Matters
Your employment agreement is more than legal protection — it’s a reflection of how you lead and how you value your people.
It sets expectations early – Clear roles, responsibilities, hours, and pay reduce confusion later.
It protects your IP and confidentiality – Essential for startups building proprietary systems or tech.
It reduces legal risk – Avoid claims of unfair dismissal or underpayment.
It builds trust – Employees feel safer and more respected when things are spelled out clearly.
Your contract should reflect:
Fair Work Act 2009 and NES minimums
Any applicable Modern Award or Enterprise Agreement
Award classification and minimum pay rates (meet or exceed)
BOOT (Better Off Overall Test) alignment
No pay secrecy clauses (prohibited)
Flexible work request acknowledgment
Casual conversion (if casual) and public holidays/penalty rates references
Warning: Don’t copy and paste something from Google. Employment law in Australia is specific — and what works in the US, UK, or even across states might not work for your business.
What to Include in an Draft Employment Agreement (Australia)
Here are the non-negotiables that must be included for compliance and best practice:
1. Position & Duties
Clearly state the role title and key responsibilities.
Include who they report to and what department (if applicable).
2. Employment Type
Full-time, part-time, or casual? This affects leave, pay, and entitlements.
Be clear about hours, regular patterns of work, and whether flexibility is expected.
Must comply with: Definitions under the Fair Work Act & relevant Awards in your industry.
3. Commencement Date & Probation Period
State the official start date.
Include a probation period (usually 3 or 6 months) and what performance will be reviewed.
4. Pay and Benefits
Include base salary or hourly rate.
State how often they’ll be paid (weekly, fortnightly, monthly).
Detail superannuation contributions and any bonuses, commissions, or equity if applicable.
Must meet: National Minimum Wage or the rate in the relevant Award.
5. Hours of Work
Nominate ordinary hours and days.
Explain expectations for overtime, time in lieu, and after-hours contact (if relevant).
6. Leave Entitlements
Annual leave, personal/carer’s leave, parental leave, long service leave — all governed by the National Employment Standards (NES).
For casuals: state that they receive casual loading instead of paid leave.
7. Confidentiality & IP Clauses
Include clauses to protect your intellectual property and trade secrets.
This is especially important if the employee is building tech, software, or content.
8. Termination & Notice Periods
Set out how employment can be ended — by either party.
Include minimum notice periods required under the NES or Fair Work Act.
Must align with: Fair Work notice periods or Award-specific rules.
9. Dispute Resolution Process
Outline how you’ll handle disputes or grievances.
This helps protect both parties and shows a commitment to fair process.
10. Policies and Procedures
Reference your employee handbook or key business policies (e.g., code of conduct, social media use).
Note that these policies may change over time.
Mentor Tip: Once your employment agreement is in place, creating an employee handbook is the next smart move. It becomes a practical tool during onboarding and sets the tone for how things are done in your business. As your team grows, this handbook will save you time, support consistency, and help every new hire feel grounded from day one. It's built for the people who power your company.
Award Coverage & Why It Matters
Most employees in Australia are covered by a Modern Award, which sets the minimum pay and conditions for certain industries or roles.
Use the Fair Work Ombudsman’s Award Finder to check which award applies to your employee.
If your employment agreement contradicts the award, the award overrides the contract — even if the employee signs it.
Modern Awards — Classification, Pay Rates & BOOT
Identify the correct Award and classification level, ensure rates/allowances match, and confirm the contract leaves the employee better off overall than the Award. If unsure, seek HR/legal advice.
EMPLOYMENT MATRIX - Full Time vs Part Time vs Casual
Employment Type | Leave Entitlements | Loading/Overtime | Hours Pattern | Notice/Conversion |
Full-time | Annual + personal/carer’s + parental + LSL (state) | Overtime/penalties per Award | Predetermined | NES notice periods |
Part-time | Pro-rata leave as above | Overtime beyond agreed hours; penalties per Award | Regular pattern | NES notice; changes need agreement |
Casual | No paid leave; casual loading applies | Variable | Casual conversion rights where eligible |
Employment vs Contractor: Know the Difference
One of the most common (and costly) mistakes founders make is misclassifying team members. Employees and contractors have very different rights, responsibilities, and tax obligations in Australia — and getting it wrong can trigger Fair Work investigations, tax penalties, and legal claims.
I highly recommend you discuss this with your accountant and here is a guide to spot the differences between the two:
Tax
Employee: You’re responsible for withholding tax and paying super.
Contractor: They manage their own tax obligations.
Tools & Equipment
Employee: You generally provide the tools and equipment needed for the job.Contractor: They usually use their own tools and resources.
Work Hours & Control
Employee: You set the hours, direct the work, and manage performance.
Contractor: They have more control over when and how they work.
Leave & Entitlements
Employee: Entitled to paid leave (annual, sick, parental) based on their employment type.Contractor: Not entitled to leave under the Fair Work Act.
Ongoing Relationship
Employee: Often ongoing or long-term with expectations of continuing work.
Contractor: Usually project-based or fixed-term with no ongoing obligation.
Mentors Tip: If you’re unsure, use the ATO’s Employee vs Contractor Tool to assess the correct classification.
Common Mistakes Founders Make
Using overseas templates
Australian employment law is specific and differs greatly from US or UK systems. Using foreign templates can lead to non-compliance and expose you to legal action or Fair Work claims.
Leaving out award details
If your employee falls under a modern award, those entitlements apply whether you reference them or not. Leaving them out won’t protect you — it could just mean underpayment issues and backpay claims later.
Forgetting probation clauses
Without a clearly defined probation period, you lose the flexibility to terminate underperformers early. This can turn a wrong hire into an expensive, ongoing problem.
Ignoring IP and confidentiality clauses
Failing to lock down intellectual property or confidential information leaves your startup open to leaks or disputes. Especially in tech and product-driven businesses, this puts your competitive edge at serious risk.
Not keeping agreements updated
Fair Work and employment regulations evolve regularly. If your contracts don’t reflect current law, they may be unenforceable — or worse, expose you to penalties or lawsuits.
Not keeping it updated
Employment law changes. Make sure your agreements do too.
What to Do Right Now
✅ Use the Fair Work Ombudsman templates – Free, compliant templates for full-time, part-time and casual employees.
✅ Need help getting it right? Talk to Noize — we guide founders through the key elements of compliance so you can work confidently with your legal team or advisor. This isn’t just about HR — solid agreements help protect your IP, clarify founder roles, and support your culture across every part of the business [Noize.com.au]
✅ Building your entire team from scratch? Check out The Startup Deck — our all-in-one toolkit for hiring, onboarding, and managing employees the right way.
The Bottom Line
Hiring your first employee is a huge milestone — but it comes with real responsibilities. A clear, compliant employment agreement protects both sides and sets the tone for everything that follows.
I encourage every business owner to see employment agreements as more than a legal formality — they’re your first real opportunity to lead with clarity and trust. This is where you communicate not just what the role is, but why it matters. When your team understands the bigger picture and feels respected from day one, they don’t just join a company — they join a cause.
With careful and considerate planning, your employment agreement can help define the workplace culture you’re building — one rooted in purpose, accountability, and shared belief.
Take the time to get this right — your business (and your future team) will thank you for it.
FAQs
Do I have to give the Fair Work Information Statement?
Yes. Provide the FWIS to all employees and the CEIS to casuals at commencement.
How do I find the right Award and classification?
Use Fair Work’s Award Finder and match duties/level. Ensure your pay meets/exceeds Award rates and passes BOOT.
Are pay secrecy clauses allowed?
No. Pay secrecy terms are prohibited; employees can discuss pay.
What is casual conversion?
Eligible casuals may convert to permanent after a qualifying period; outline the process in policies/contract notes.
What is super stapling?
If no fund is chosen, request the employee’s stapled super fund from the ATO before defaulting to your fund.
Can I include a restraint of trade clause?
Yes, if reasonable in scope, duration, and geography, to protect legitimate business interests.
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