Plenty of businesses still hire on a handshake, a text message and a start date. It works fine while everyone is happy. The problem shows up later, when there is a disagreement about hours, a dispute over notice, or an employee leaves and takes client contacts with them.
A written agreement is the cheapest protection a small business has. It costs a fraction of what a Fair Work claim costs and it takes an afternoon to sort out.
Employment contracts for small business do not need to be long or heavily legalistic. They need to be accurate, current, and actually signed.
Does a small business have to provide a written contract?
There is no general legal requirement for an employment contract to be in writing. An employment relationship can exist on a verbal agreement alone.
What the law does require is that new employees receive the Fair Work Information Statement, and that new casual employees receive the Casual Employment Information Statement as well. It also requires you to keep employment records and issue payslips.
So a written contract is optional in the strict sense and close to essential in practice. Without one, the terms of employment are whatever a court or the Fair Work Commission decides they were, based on what each side remembers.
What should an employment contract include?
At a minimum, a contract should cover:
- The employment type, being full time, part time, casual, or fixed term.
- The award or enterprise agreement that applies, and the classification level under it.
- The position, reporting line and place of work.
- Hours of work, and how additional hours are treated.
- Rate of pay, and what the rate is intended to absorb if an annualised salary is used.
- Leave entitlements and how they accrue.
- Notice of termination on both sides, and probation arrangements.
- Confidentiality, intellectual property and return of company property.
- A clause confirming the contract replaces any earlier agreement or understanding.
Naming the award and classification level is the clause most often left out, and it is the one that causes the most trouble. If the classification is not recorded anywhere, it is very hard to demonstrate later that the right rate was applied.
Which clauses date the fastest?
Employment law has moved quickly over the last few years, and several standard clauses no longer reflect the current position.
Casual employment is the clearest example. The definition of a casual employee has changed, casual conversion has been replaced by the employee choice pathway, and the timing of those obligations is different for small business employers. A casual clause drafted before those changes will describe a system that no longer exists.
Fixed term contracts are another. Limits now apply to the length of fixed term arrangements and how often they can be renewed, with exceptions. Rolling a fixed term contract over each year without checking the current rules is a common exposure.
The right to disconnect has also been introduced, reaching small business employees from 26 August 2025. Contracts and policies that assume an employee will always be contactable outside their hours need a fresh look.
Common problems we see
The most frequent issue is a contract that was signed years ago for a different job. The employee has since been promoted, changed hours, moved locations or taken on supervisory duties, and nothing was updated.
The second is the template borrowed from another business, often from a different state or a different industry, naming an award that does not apply. A contract that references the wrong award is worse than no contract, because it looks authoritative while being wrong.
The third is the unsigned contract. It was sent, it was never returned, and nobody chased it. Keep the signed copy on file with the date it was signed.
When should you reissue a contract?
A variation letter is enough for most changes, such as a pay increase or a small change to hours. A new contract is worth issuing when the role itself changes materially, when an employee moves from casual to permanent, when the applicable award or classification changes, or when the current document is several years old and no longer reflects the law.
Whichever route you take, get it in writing and get it signed before the change takes effect. Retrospective paperwork carries far less weight.
What a contract cannot do
A contract cannot reduce an entitlement below the National Employment Standards or the applicable award. Any term that tries to will simply not apply, and the underlying entitlement stands.
That includes annualised salary arrangements. If the salary does not cover what the award would have paid across the year once overtime, penalties and allowances are counted, the shortfall is still owed. Annualised salaries are useful, but they need to be reconciled rather than set and forgotten.
Restraint clauses are similar. They are enforceable only so far as they protect a legitimate business interest and go no further than reasonably necessary. A broad restraint on a junior employee is unlikely to hold.
How ProcessWorx Can Support You
This is general information rather than legal advice. If you would like your employment contracts reviewed or rebuilt for your business, or you are unsure which award and classification apply, our HR team can help. Ongoing support is available through HR Shield if you would rather have someone on hand year round.
Contact us on (08) 9316 9896 or get in touch.
Follow ProcessWorx on LinkedIn, Facebook, Instagram, YouTube, X and the Lets Chat HR & Safety podcast to keep up with the latest HR and Safety news.
