How to write an employee contract: examples and template

A clear employment contract protects both the employer and the employee. It sets out job responsibilities, pay, benefits, and legal protections, making sure both sides understand their rights and obligations.

Without a written employment agreement, misunderstandings can turn into disputes. A well-written contract can help businesses stay compliant with labor laws and create a strong foundation for the employment relationship.

In this guide, we explain what an employment contract is, the key sections it needs to have, and how to write a good one. We also include an employment contract template and a couple of examples to help you understand the process. 

What is an employment contract?

An employment contract is a legally binding agreement between an employer and an employee. It defines the employment relationship, outlining job duties, compensation, benefits, working hours, and other key elements of the employment agreement. A clear contract helps prevent disputes by making sure both parties understand their rights and obligations from the get-go.

Employment contracts can be in writing or verbal, but written agreements are the more official version that offer better protection. Verbal agreements may be legally valid in some cases, but they're very difficult to enforce if a disagreement arises. A written employment agreement clearly outlines all terms and reduces the risk of misunderstandings.

6 sections every employee contract should include

A strong employment contract clearly outlines the expectations and rights of both the employer and the employee. Every contract should include key sections that define the role, compensation, confidentiality rules, and termination terms. These details protect both parties and help avoid disputes: 

1. Job title and description 

The contract must include the employee’s official job title and a detailed job description. This section outlines the main tasks, responsibilities, and reporting structure. A clear job description sets expectations and prevents confusion about the role. 

For example:

Job title: Marketing Coordinator
Job description: Responsible for managing social media accounts, creating content, and supporting the marketing team with campaigns and analytics. Reports to the Marketing Manager.

2. Compensation and benefits 

This section details the employee’s salary, pay frequency, and any bonuses or incentives. It should also cover benefits like health insurance, paid leave, retirement plans, and any stock options. Listing these details ensures transparency around earnings and perks. 

For example:

Base salary: $65,000 per year, paid biweekly
Bonuses: Eligible for an annual performance-based bonus of up to 10% of base salary
Benefits: Includes health, dental, and vision insurance, plus a 401(k) with employer matching

3. Employment type and duration 

The contract must specify whether the employment is full-time, part-time, or contract-based. If the role has a set duration, such as for a project or temporary position, the contract should include the start and end dates. 

For example:

Employment type: Full-time, 40 hours per week
Employment duration: Ongoing, subject to company policies and termination conditions

4. Confidentiality 

Many roles require employees to handle sensitive information. A confidentiality clause encourages employees to not share proprietary data, trade secrets, or client information with outsiders. This section can also include non-disclosure agreements (NDAs) to provide the employer with extra protection.

Example: The employee agrees not to disclose, share, or use company trade secrets, financial data, or customer information for any purpose outside of their employment.

5. Responsibilities and duties 

A detailed breakdown of responsibilities prevents misunderstandings. This section lists specific tasks the employee must perform and outlines performance expectations from the employer. 

Example: The employee is responsible for responding to customer inquiries, processing orders, and updating the CRM system. Performance will be evaluated quarterly based on response time, accuracy, and customer satisfaction ratings.

6. Termination 

The contract must define the conditions under which the employer or employee can terminate the employment agreement. It should outline notice periods, severance pay (if applicable), and any specific grounds for termination, such as misconduct or company restructuring.

Example: Either party may terminate employment with two weeks' written notice. Immediate termination may occur in cases of gross misconduct, breach of confidentiality, or failure to meet job expectations.

Employee contract template 

Below is a detailed contract template that covers essential sections every agreement should include:

2 employee contract examples

Below are two detailed examples of how to use the employee contract template:

Examptle 1

Example 2

How to write an employment contract: 7 steps 

A well-written employment contract eliminates confusion and prevents disputes. Every section should be clear, specific, and legally sound. A vague contract can lead to misunderstandings, compliance issues, and legal risks. The goal is to define the terms of the employment relationship in a way that protects both the employer and the employee.

The following steps cover key details that employers need to consider when drafting a contract, with a focus on the practical decisions and legal nuances that can make or break an employment agreement.

Step 1. Title the employment contract 

The title of the contract should clearly state the type of employment agreement. A generic title like “Employment Agreement” isn't enough in some cases. Different types of employment require different legal considerations, and it can be helpful if the title reflects that.

For example, for a fixed-term agreement, it might include “Fixed-Term Employment Agreement,” while for a probationary contract, it might state “Probationary Employment Agreement.” If the role is project-based, the contract title should specify that as well.

If the company hires at-will employees, the contract should include that phrase in the title so there’s no confusion about termination rights.

Step 2. Identify the parties 

The contract must include the full legal names of both the employer and the employee. The company name must match state and federal business records to avoid legal issues.

If the employee’s legal name differs from their preferred name, the contract must specify which name will appear on tax and payroll documents. When hiring under a parent company or subsidiary, the contract must clearly state which entity holds legal responsibility for the employment relationship.

For employees working in multiple locations or remotely, the contract must specify which jurisdiction governs legal disputes. This is because state laws vary in worker protections, which can impact termination policies, overtime rules, and other employment terms.

Step 3. List the conditions 

Employment conditions vary based on the type of job, industry, and legal requirements. The employment contract should include:

• The start date of employment
• The expected duration (ongoing or fixed-term)
• Any probationary period and what happens when it ends
• At-will vs. contract-based terms (if applicable)

For fixed-term contracts, the agreement must specify whether the employment ends automatically or if there's an option for extension with approval. If the role follows at-will employment, the contract must state that the employer can terminate the agreement at any time, with or without cause, unless state law requires a notice period.

When providing visa sponsorship, the employer must include a clause stating that continued employment requires maintaining legal work authorization.

For roles with shift work, seasonal employment, or fluctuating hours, the employment contract must explain how the employer assigns schedules. Some states mandate guaranteed hours or predictable scheduling policies, so the employment contract must reflect any legal requirements, too.

Step 4. Outline job responsibilities 

A job title alone doesn't define the role. The contract must list specific job duties, performance expectations, and reporting structure to prevent confusion. For instance:

• Core responsibilities the employee must handle
• Performance metrics, such as deadlines, quality standards, or quotas
• Who assigns tasks and how the employee reports progress
• Flexibility of duties and whether they may change over time

For roles with sales quotas, service targets, or production benchmarks, outline how the company tracks performance and what happens if goals aren't met.

If the job requires certifications or licenses, state that maintaining these credentials is a condition of employment. If the role involves travel or relocation, explain travel frequency, expense reimbursements, and relocation support.

Step 5. Include compensation details 

A compensation clause must provide more than just a salary or hourly wage. Break down:

• How the company pays the employee (hourly, salary, commission, or project-based)
• Overtime eligibility (exempt vs. non-exempt under the Fair Labor Standards Act)
• Payment schedule (weekly, biweekly, monthly)
• Deductions for taxes, benefits, or union fees

For jobs with bonuses, commissions, or profit-sharing, specify:

• How the employee can earn bonuses (performance-based, company revenue, or other criteria)
• When payouts occur (quarterly, annually, or upon project completion)
• What happens if the employee leaves before receiving a bonus

If offering stock options or restricted stock units, explain vesting schedules, tax obligations, and forfeiture rules.

For roles with tips, per diem allowances, or expense reimbursements, clarify which payments count as taxable income.

Step 6. Add non-disclosure clauses

A confidentiality clause encourages employees to not share sensitive company information. A vague NDA creates loopholes, so make sure to define:

• What information remains confidential (client lists, financials, trade secrets, software code)
• How long confidentiality lasts (during and after employment)
• Consequences of violating confidentiality (legal action, financial penalties)

For companies that use non-compete agreements, include:

• Industries or competitors the employee can't work for
• Timeframe of the restriction (six months, one year, or more)
• Geographic scope (local, state-wide, national, or international)

Some states don't allow non-compete clauses in certain industries. So, check local labor laws before enforcing one.

For remote employees, state whether they may work on personal devices or if they must use company-provided equipment to protect sensitive data.

Step 7. Consult with an employment lawyer 

Employment laws change frequently, so legal review is always a good idea. A lawyer can look over the employment contract and make sure it complies with:

• State-specific termination laws (some states require severance pay or notice periods)
• Overtime exemption status (misclassifying employees leads to penalties)
• Paid leave laws (several states mandate paid sick leave)
• Data protection laws (especially for roles handling personal customer information)

For companies hiring internationally, local labor laws may override standard contract terms. Some countries require mandatory severance pay, guaranteed bonuses, or strict limits on at-will employment.

Employers working with independent contractors must verify proper classification. Misclassifying workers results in lawsuits and tax penalties. A lawyer ensures the contract aligns with both federal and state regulations.

Automate and streamline your employee contracts with Rippling 

Manually creating, sending, and tracking employment contracts can slow down hiring and introduce compliance risks. Rippling simplifies this process by letting you generate employment agreements, send them for e-signatures, and store everything in one place. The best part? You can do it all in minutes.

Seamlessly create and send contracts

With Rippling Recruiting, you can generate legally compliant employment contracts tailored to different roles and locations. Instead of manually drafting agreements for each new hire, you can automate offer letters with pre-built templates that match your company’s policies and local labor laws.

Ensure compliance with labor laws

Different states and countries have unique employment regulations, and failing to comply can lead to legal issues. Rippling automatically applies local labor laws based on the employee’s work location, which can help you stay compliant without extra effort.

Integrated e-signatures and document tracking

Once you send a contract, Rippling tracks its status in real-time. Employees can sign electronically, and HR teams can see who has completed their paperwork and who still needs to sign. No more chasing down signatures or dealing with paperwork delays.

All-in-one workforce management

Rippling isn’t just for employment contracts. It's a complete workforce management platform that combines HR, Payroll, IT, and Spend Management in one system, all built on a single source of truth. This means every aspect of hiring, onboarding, and managing employees happens in one place, reducing errors and eliminating the need for multiple disconnected tools.

FAQs on employee contract templates

What’s the difference between an employee contract and an independent contractor agreement?

An employee contract outlines an employment relationship where the company controls work hours, responsibilities, and ongoing job expectations. Employees typically receive benefits, have taxes withheld by the employer, and follow company policies.

An independent contractor agreement covers a business relationship where the worker operates as a separate entity. The company doesn't control work hours or provide benefits, and contractors handle their own taxes. Contractors usually work on a project basis and retain control over how they complete the work.

Misclassifying employees as independent contractors can result in legal and tax penalties. If the company directs the worker’s schedule, provides tools, and requires exclusive work, the worker likely qualifies as an employee.

Are employee contract templates legally binding?

Yes, an employment contract becomes legally binding once both parties sign it. However, the contract must comply with federal, state, and local employment laws to hold up in court. Any clause that violates labor laws, such as an agreement to work without overtime pay in a non-exempt role, would be unenforceable.

To strengthen enforceability:

• Ensure all employment terms follow labor laws
• Avoid vague language and clearly define job expectations, compensation, and termination policies
• Have a lawyer review the contract, especially for non-compete or confidentiality clauses

Electronic signatures also make contracts legally binding, as long as both parties express intent to sign and the system tracks agreement details.

How often should employee contracts be updated?

It's a good idea to review employment contracts at least once a year or whenever company policies, labor laws, or job responsibilities change. Regular updates can help you make sure that contracts stay compliant and reflect the company’s current employment terms.

Update contracts when:

• Labor laws change, such as minimum wage increases or new paid leave policies
• Company policies change, like benefit adjustments or revised remote work rules
• Job roles evolve, requiring different responsibilities, compensation, or reporting structures

If an employee’s role shifts significantly, issue an updated contract or an addendum outlining new terms. Without an update, employees may rely on outdated contract terms, which can cause disputes.

Can an employee contract be terminated before the end of the agreement?

Yes, but the contract must specify termination conditions to avoid legal issues. At-will employment agreements allow either party to end the contract at any time, with or without cause, unless state laws require notice.

For fixed-term contracts, early termination requires a valid reason unless the agreement includes an opt-out clause. Employers who terminate an employment agreement early without cause may need to provide severance or compensation for the remaining contract period.

Common termination clauses include:

• Misconduct or policy violations, such as fraud or harassment
• Performance issues, if the employee fails to meet outlined job expectations
• Company restructuring (if layoffs or business changes remove the role)

A well-written contract should define notice periods, final pay details, and any severance agreements to prevent disputes when ending an employment relationship early.

This blog is based on information available to Rippling as of March 12, 2025.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.