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Table of contents

What Is an Employment Contract?

An employment contract is an agreement between an employee and an employer. It details the employee’s role, the responsibilities of both parties, provides legal protection, and other benefits for both the employee and the employer.

Writing an employment contract can seem like a complex task, but with the right information and a little help, you’ll be able to have a contract that works for both you and the other party. If you're concerned about covering all the necessary details in your employment agreement, then this guide has everything you need to write a comprehensive document that's easy for everyone to understand.

Our employment contract template will help make a complex task much easier for you. It's free and covers all the basics—from the job details, working hours, services involved, severance pay, vacation time to paid time, contract termination, and much more.

Note: Sign-up now to start creating your free employment contract. It has all the basic elements you’ll need to get going and it’s been written and reviewed by top lawyers, so you’ll be totally covered.

Why You Need an Employment Contract

A contract of employment is essential for legal protection and assurances that both worker and employer rights are upheld.

An employment agreement is helpful for the two (or more) parties involved to understand their responsibilities and employment terms, and can act as a point of reference for issues surrounding benefits, payments, and workplace expectations.

A clear employee contract is also vital for reducing miscommunication between the two parties and can reduce the likelihood of disagreements or disputes further down the line.

If you're concerned about creating a contract from scratch, then Bonsai has your back. Our personalized contract templates are free for you to download and use, and will make sure you've covered all the basics you need for a legit employment agreement.

What Should an Employment Contract Include?

Now you know why an employee contract is important, the next step is to create your own!

Whether you’re offering a job to a new employee or you are the new employee, it's important you know how to create an employment contract. This type of document will need to include specific information to make sure both the employer and the employee involved have their requirements met and agreed to.

If you're creating an employment contract template from scratch, you should hire an attorney or law firm to make sure it's legally binding. At the very least, you should get legal advice. If this sounds like too much effort, you can use an employee contract template from Bonsai. It will contain everything we’re about to cover on this page.

If you're unsure exactly what this type of agreement should look like, let alone write one yourself, then below are the 9 essential clauses that every contract should include.

Details of the employee and employer

This section introduces both parties and you’ll need to include everything from the employee and company name, to postal addresses and contact information. The same goes for the employer.

Terms of employment

In this section, you should summarise the employment conditions that have been agreed upon by all involved parties.

This will include a job description and the responsibilities involved with the position. You may wish to highlight how employees are expected to handle confidential or sensitive information.

These types of details can affect the outcome of the employment agreement, so it's a good idea to include as much as you think is relevant.

Some employment conditions are considered 'obvious' and therefore do not need to be included in this section. If you're feeling unsure, use one of our contract templates to help you out.

Key working dates

The contract template should clearly state the employee start date, and should also include an end date if applicable–such as for fixed-term positions or temporary employees.

You may also wish to state whether your employee will need to pass a probationary period, and give the date that the probation will end.

Work schedules

The work agreement should stipulate the employee's expected working hours in an average week.

It should also discuss whether overtime is permitted, and what is expected in the event the employee cannot fulfil their expected hours. The desires of the employer could be that they don't wish to pay for overtime and that the employee should use their best efforts to stick to a schedule. Depending on the governing law, you may need to research overtime rights where you're based.

Terms of payment

Your employment agreement should stipulate whether an employee is salaried, or will be paid based on hours worked. You should also define how often an employee will be paid and in what manner.

If your business offers overtime, you should highlight how employees will be paid for that time.

Terms of holiday and leave entitlement

Depending on the length of the contract, you will need to outline how much vacation time the employee will receive. If they will be a permanent employee, you can simply state how many days of annual leave they can take.

If applicable, you should also highlight the other reasons that new hires could obtain leave–such as illness, bereavement, or maternity leave.

It is also important to define how employees should request leave, such as by stating the desired notice period.

Employee benefits

If your business offers benefits, such as health insurance, pension schemes, or access to certain services, your employment agreement must go into detail about what they are and who is entitled to them. At this point, you should understand the difference between an employee and an independent contractor, as one may have the right to certain benefits over the other.

Depending on the company, benefits can also range from an education allowance, work equipment, or paid travel to business conferences. The employer should list all the benefits included with the position in the employment agreement.

Notice period and job termination

This section will vary depending on the type of employee contract you are drafting.

For permanent positions, you may wish to document the amount of notice you will give to an employee, and state how much notice you require from them in the event they decide to leave.

If the position requires an initial probationary period, you should state how the employee will be notified if they do not make it through this period.

For fixed-term positions, you should restate the agreed leaving date, and stipulate how the employer should be notified in the event an employee wishes to leave early.

You should also highlight your company's standard procedure for terminating contracts.

Details of employment rights and unions

As an employer, you must inform the employee of their workplace rights and your stance on Unions.

Key things to mention include the right to a safe workplace and your staff's entitlement to redundancy provisions. Depending on where you are, the employer may need to provide legal advice and other services for their employees.

If you're unsure which rights apply to your industry, or how to discuss Unions, then use an employment template to ensure you've got everything covered.

IRS and Tax Requirements

For the US specifically, both the employee and the employer will need to complete certain forms for the IRS and tax requirements.

If you’re not sure what these are, here’s a list below:

  • Register as an Employer With the IRS
  • Form W-4 (or W-9 for contractors) for Federal Income Tax Withholding
  • Form W-2
  • Form I-9 and E-Verify System for Employment Eligibility
  • Job Application Form
  • Register With State Employment Agencies (check your state's regulations)
  • Other state-specific regulation forms (check the regulations of your state)

For freelancers, it's a good idea to use a tax guide to help ease the strain around freelance tax rules.

Types of Employment Contract

Permanent full-time

A permanent full-time employment contract is required when the employee is hired to do full-time hours (which can be country-specific) for the employer. It also requires the employer to provide certain benefits to the employee, such as health insurance and holiday leave.

Permanent part-time

Similar to a permanent full-time contract, this employee contract type usually states the employee will be hired on for half of the hours required in a full-time contract agreement. They will still be entitled to benefits such as health insurance or holiday leave, but the employee may qualify for less in some cases.

Temporary or fixed Term

This type of employment contract offers greater flexibility for both parties. Generally, the employee will be hired for a specific amount of time or for a specific project. Once the project is complete (or amount of time reached), the contract will be terminated. The timeframe of this employment contract can be dependent on whether the employee agrees to the specific dates or not.

NDAs, Non-compete and Other Types of Employment Agreements

Independent contractor agreement

Independent contractors will usually negotiate their own rates and working arrangements, which the employer will agree to. Although they can work the same hours as a full-time employee, they won’t usually be entitled to any benefits the employer offers their permanent full-time employees.

One main benefit of an independent contractor agreement is that they can work for more than one client at a time, provided the other client doesn’t infringe on another agreement.

If you fall into this category, then start using an independent contractor agreement instead.

Non-compete agreement

This specific agreement between an employer and an employee means the employee cannot and will not work with the employer's direct competition. This will usually be for the duration of the contract and also for a specific period of time at the end of the contract.

(NDA) Non-disclosure agreement

A non-disclosure (NDA) or confidentiality agreement is an agreement between two parties to keep certain information confidential. This can include sensitive information like trade secrets.

Depending on the parties involved, you may need to sign a separate NDA from the one in your contract. You can use your own NDA template for this or request the other party to write one up.

Subcontractor agreement

A subcontractor agreement is a contract between a subcontractor and an independent contractor. The subcontractor is employed by the independent contractor, meaning the responsibility falls on the independent contractor to pay them.

Terminating or Breaking an Employment Contract


When an employee misbehaves or performs badly in their role in a way that breaches their contract or the code of conduct of a company, the employer can dismiss their services. It’s a type of termination that results from something that the employee does.

Termination of agreement clause

A termination of agreement clause outlines the specific reasons a contract between the employee and the employer can be terminated.

Some reasons could be:

  • Both parties mutually agree
  • The employer becomes bankrupt
  • A law firm provides a legal order to terminate the contract

Breach of contract

A breach of contract is when an agreement or clause in a contract is violated, which can result in termination. It happens when one of the parties involved doesn’t uphold or honour certain agreements outlined in the contract.

Common Employment Contract Questions

What are the main differences between a permanent employment contract and a temporary employment contract?

There is one main difference between these two types of contracts—a permanent contract has no fixed end date, whereas a temporary contract does.

This means that a temporary employment contract can be used when you require a specialist for a project or a freelancer for a fixed amount of time.

What type of contract template can I use for freelancers?

There are all kinds of employment contract templates for freelancers, including in graphic design, wedding florist contract, influencing, copywriting, wedding photography contract, and project management. Here at Bonsai, we offer free templates for all of these services and more.

Using a contract template from Bonsai means it will be vetted by legal professionals and hundreds of other freelancers in those fields. They’re also easily customizable, so you can add your specific requirements when needed.

Can I write my own employment contract?

If you have the time, resources, and knowledge to put together a legally binding contract yourself, then by all means write your own employment contract.

The perk of signing up to Bonsai and using an employment contract template is that it's free and all the work is done for you. Because our employment contracts are vetted, you won't need a pricey law firm to validate the contract (although it's always a good idea to get legal advice about contracts from a professional). The best thing is you can still write and customize the contract in any way you want.

Frequently Asked Questions
Questions about this template.

Can I write my own employment contract template?

You can write your own employment contract template although this can be very time consuming and confusing as you may stumble across some potential legal issues. Why not head over to Bonsai's website and check out their employment templates they have to offer - saving you time and stress!

How are employee contracts made?

You want to include the basics, for example - the terms of employment, salary, responsibilities and rules within the work place, compensation information etc. Head over to Bonsai's website and use their ready made professional employment template, to ensure you communicate your expectations across clearly to your future employee.

Template preview

Free Employment Contract Template

Employment Contract Template

First Name
Last Name
Acme LLC.
First Name
Last Name
Corporation Corp.

This Contract is between ABC Corp (the "Client") and Acme company, a Colorado limited liability company (the "Contractor").

The Contract is dated [the date both parties sign].


1.1 Project. The Client is hiring the Contractor to do the following: review brand guidelines and social media management services

1.2 Schedule. The Contractor will begin work on [DATE] and will continue until the work is completed. This Contract can be ended by either Client or Contractor at any time, pursuant to the terms of Section 6, Term and Termination.

1.3 Payment. The Client will pay the Contractor a rate of $170.00 (USD) per hour. Of this, the Client will pay the Contractor $2,500.00 (USD) before work begins.

1.4 Expenses. The Client will reimburse the Contractor's expenses. Expenses do not need to be pre-approved by the Client.

1.5 Invoices. The Contractor will invoice the Client at the end of the project. The Client agrees to pay the amount owed within 15 days of receiving the invoice. Payment after that date will incur a late fee of 1.0% per month on the outstanding amount.

1.6 Support. The Contractor will not provide support for any deliverable once the Client accepts it, unless otherwise agreed in writing.


2.1 Client Owns All Work Product. As part of this job, the Contractor is creating “work product” for the Client. To avoid confusion, work product is the finished product, as well as drafts, notes, materials, mockups, hardware, designs, inventions, patents, code, and anything else that the Contractor works on—that is, conceives, creates, designs, develops, invents, works on, or reduces to practice—as part of this project, whether before the date of this Contract or after. The Contractor hereby gives the Client this work product once the Client pays for it in full. This means the Contractor is giving the Client all of its rights, titles, and interests in and to the work product (including intellectual property rights), and the Client will be the sole owner of it. The Client can use the work product however it wants or it can decide not to use the work product at all. The Client, for example, can modify, destroy, or sell it, as it sees fit.

2.2 Contractor's Use Of Work Product. Once the Contractor gives the work product to the Client, the Contractor does not have any rights to it, except those that the Client explicitly gives the Contractor here. The Client gives permission to use the work product as part of portfolios and websites, in galleries, and in other media, so long as it is to showcase the work and not for any other purpose. The Client does not give permission to sell or otherwise use the work product to make money or for any other commercial use. The Client is not allowed to take back this license, even after the Contract ends.

2.3 Contractor's Help Securing Ownership. In the future, the Client may need the Contractor's help to show that the Client owns the work product or to complete the transfer. The Contractor agrees to help with that. For example, the Contractor may have to sign a patent application. The Client will pay any required expenses for this. If the Client can’t find the Contractor, the Contractor agrees that the Client can act on the Contractor's behalf to accomplish the same thing. The following language gives the Client that right: if the Client can’t find the Contractor after spending reasonable effort trying to do so, the Contractor hereby irrevocably designates and appoints the Client as the Contractor's agent and attorney-in-fact, which appointment is coupled with an interest, to act for the Contractor and on the Contractor's behalf to execute, verify, and file the required documents and to take any other legal action to accomplish the purposes of paragraph 2.1 (Client Owns All Work Product).

2.4 Contractor's IP That Is Not Work Product. During the course of this project, the Contractor might use intellectual property that the Contractor owns or has licensed from a third party, but that does not qualify as “work product.” This is called “background IP.” Possible examples of background IP are pre-existing code, type fonts, properly-licensed stock photos, and web application tools. The Contractor is not giving the Client this background IP. But, as part of the Contract, the Contractor is giving the Client a right to use and license (with the right to sublicense) the background IP to develop, market, sell, and support the Client’s products and services. The Client may use this background IP worldwide and free of charge, but it cannot transfer its rights to the background IP (except as allowed in Section 11.1 (Assignment)). The Client cannot sell or license the background IP separately from its products or services. The Contractor cannot take back this grant, and this grant does not end when the Contract is over.

2.5 Contractor's Right To Use Client IP. The Contractor may need to use the Client’s intellectual property to do its job. For example, if the Client is hiring the Contractor to build a website, the Contractor may have to use the Client’s logo. The Client agrees to let the Contractor use the Client’s intellectual property and other intellectual property that the Client controls to the extent reasonably necessary to do the Contractor's job. Beyond that, the Client is not giving the Contractor any intellectual property rights, unless specifically stated otherwise in this Contract.

3. COMPETITIVE ENGAGEMENTS. The Contractor won’t work for a competitor of the Client until this Contract ends. To avoid confusion, a competitor is any third party that develops, manufactures, promotes, sells, licenses, distributes, or provides products or services that are substantially similar to the Client’s products or services. A competitor is also a third party that plans to do any of those things. The one exception to this restriction is if the Contractor asks for permission beforehand and the Client agrees to it in writing. If the Contractor uses employees or subcontractors, the Contractor must make sure they follow the obligations in this paragraph, as well.

4. NON-SOLICITATION. Until this Contract ends, the Contractor won’t: (a) encourage Client employees or service providers to stop working for the Client; (b) encourage Client customers or clients to stop doing business with the Client; or (c) hire anyone who worked for the Client over the 12-month period before the Contract ended. The one exception is if the Contractor puts out a general ad and someone who happened to work for the Client responds. In that case, the Contractor may hire that candidate. The Contractor promises that it won’t do anything in this paragraph on behalf of itself or a third party.


5.1 Overview. This section contains important promises between the parties.

5.2 Authority To Sign. Each party promises to the other party that it has the authority to enter into this Contract and to perform all of its obligations under this Contract.

5.3 Contractor Has Right To Give Client Work Product. The Contractor promises that it owns the work product, that the Contractor is able to give the work product to the Client, and that no other party will claim that it owns the work product. If the Contractor uses employees or subcontractors, the Contractor also promises that these employees and subcontractors have signed contracts with the Contractor giving the Contractor any rights that the employees or subcontractors have related to the Contractor's background IP and work product.

5.4 Contractor Will Comply With Laws. The Contractor promises that the manner it does this job, its work product, and any background IP it uses comply with applicable U.S. and foreign laws and regulations.

5.5 Work Product Does Not Infringe. The Contractor promises that its work product does not and will not infringe on someone else’s intellectual property rights, that the Contractor has the right to let the Client use the background IP, and that this Contract does not and will not violate any contract that the Contractor has entered into or will enter into with someone else.

5.6 Client Will Review Work. The Client promises to review the work product, to be reasonably available to the Contractor if the Contractor has questions regarding this project, and to provide timely feedback and decisions.

5.7 Client-Supplied Material Does Not Infringe. If the Client provides the Contractor with material to incorporate into the work product, the Client promises that this material does not infringe on someone else’s intellectual property rights.

6. TERM AND TERMINATION. This Contract is ongoing until the work is completed. Either party may end this Contract for any reason by sending an email or letter to the other party, informing the recipient that the sender is ending the Contract and that the Contract will end in 7 days. The Contract officially ends once that time has passed. The party that is ending the Contract must provide notice by taking the steps explained in Section 11.4. The Contractor must immediately stop working as soon as it receives this notice, unless the notice says otherwise. The Client will pay the Contractor for the work done up until when the Contract ends and will reimburse the Contractor for any agreed-upon, non-cancellable expenses. The following sections don’t end even after the Contract ends: 2 (Ownership and Licenses); 3 (Competitive Engagements); 4 (Non-Solicitation); 5 (Representations); 8 (Confidential Information); 9 (Limitation of Liability); 10 (Indemnity); and 11 (General).

7. INDEPENDENT CONTRACTOR. The Client is hiring the Contractor as an independent contractor. The following statements accurately reflect their relationship:

- The Contractor will use its own equipment, tools, and material to do the work.- The Client will not control how the job is performed on a day-to-day basis. Rather, the Contractor is responsible for determining when, where, and how it will carry out the work.- The Client will not provide the Contractor with any training.- The Client and the Contractor do not have a partnership or employer-employee relationship.- The Contractor cannot enter into contracts, make promises, or act on behalf of the Client.- The Contractor is not entitled to the Client’s benefits (e.g., group insurance, retirement benefits, retirement plans, vacation days).- The Contractor is responsible for its own taxes.- The Client will not withhold social security and Medicare taxes or make payments for disability insurance, unemployment insurance, or workers compensation for the Contractor or any of the Contractor's employees or subcontractors.


8.1 Overview. This Contract imposes special restrictions on how the Client and the Contractor must handle confidential information. These obligations are explained in this section.

8.2 The Client’s Confidential Information. While working for the Client, the Contractor may come across, or be given, Client information that is confidential. This is information like customer lists, business strategies, research & development notes, statistics about a website, and other information that is private. The Contractor promises to treat this information as if it is the Contractor's own confidential information. The Contractor may use this information to do its job under this Contract, but not for anything else. For example, if the Client lets the Contractor use a customer list to send out a newsletter, the Contractor cannot use those email addresses for any other purpose. The one exception to this is if the Client gives the Contractor written permission to use the information for another purpose, the Contractor may use the information for that purpose, as well. When this Contract ends, the Contractor must give back or destroy all confidential information, and confirm that it has done so. The Contractor promises that it will not share confidential information with a third party, unless the Client gives the Contractor written permission first. The Contractor must continue to follow these obligations, even after the Contract ends. The Contractor's responsibilities only stop if the Contractor can show any of the following: (i) that the information was already public when the Contractor came across it; (ii) the information became public after the Contractor came across it, but not because of anything the Contractor did or didn’t do; (iii) the Contractor already knew the information when the Contractor came across it and the Contractor didn’t have any obligation to keep it secret; (iv) a third party provided the Contractor with the information without requiring that the Contractor keep it a secret; or (v) the Contractor created the information on its own, without using anything belonging to the Client.

8.3 Third-Party Confidential Information. It’s possible the Client and the Contractor each have access to confidential information that belongs to third parties. The Client and the Contractor each promise that it will not share with the other party confidential information that belongs to third parties, unless it is allowed to do so. If the Client or the Contractor is allowed to share confidential information with the other party and does so, the sharing party promises to tell the other party in writing of any special restrictions regarding that information.

9. LIMITATION OF LIABILITY. Neither party is liable for breach-of-contract damages that the breaching party could not reasonably have foreseen when it entered this Contract.


10.1 Overview. This section transfers certain risks between the parties if a third party sues or goes after the Client or the Contractor or both. For example, if the Client gets sued for something that the Contractor did, then the Contractor may promise to come to the Client’s defense or to reimburse the Client for any losses.

10.2 Client Indemnity. In this Contract, the Contractor agrees to indemnify the Client (and its affiliates and their directors, officers, employees, and agents) from and against all liabilities, losses, damages, and expenses (including reasonable attorneys’ fees) related to a third-party claim or proceeding arising out of: (i) the work the Contractor has done under this Contract; (ii) a breach by the Contractor of its obligations under this Contract; or (iii) a breach by the Contractor of the promises it is making in Section 5 (Representations).

10.3 Contractor Indemnity. In this Contract, the Client agrees to indemnify the Contractor (and its affiliates and their directors, officers, employees, and agents) from and against liabilities, losses, damages, and expenses (including reasonable attorneys’ fees) related to a third-party claim or proceeding arising out of a breach by the Client of its obligations under this Contract.


11.1 Assignment. This Contract applies only to the Client and the Contractor. The Contractor cannot assign its rights or delegate its obligations under this Contract to a third-party (other than by will or intestate), without first receiving the Client’s written permission. In contrast, the Client may assign its rights and delegate its obligations under this Contract without the Contractor's permission. This is necessary in case, for example, another Client buys out the Client or if the Client decides to sell the work product that results from this Contract.

11.2 Arbitration. As the exclusive means of initiating adversarial proceedings to resolve any dispute arising under this Contract, a party may demand that the dispute be resolved by arbitration administered by the American Arbitration Association in accordance with its commercial arbitration rules.

11.3 Modification; Waiver. To change anything in this Contract, the Client and the Contractor must agree to that change in writing and sign a document showing their contract. Neither party can waive its rights under this Contract or release the other party from its obligations under this Contract, unless the waiving party acknowledges it is doing so in writing and signs a document that says so.

11.4 Notices.

(a) Over the course of this Contract, one party may need to send a notice to the other party. For the notice to be valid, it must be in writing and delivered in one of the following ways: personal delivery, email, or certified or registered mail (postage prepaid, return receipt requested). The notice must be delivered to the party’s address listed at the end of this Contract or to another address that the party has provided in writing as an appropriate address to receive notice.

(b) The timing of when a notice is received can be very important. To avoid confusion, a valid notice is considered received as follows: (i) if delivered personally, it is considered received immediately; (ii) if delivered by email, it is considered received upon acknowledgement of receipt; (iii) if delivered by registered or certified mail (postage prepaid, return receipt requested), it is considered received upon receipt as indicated by the date on the signed receipt. If a party refuses to accept notice or if notice cannot be delivered because of a change in address for which no notice was given, then it is considered received when the notice is rejected or unable to be delivered. If the notice is received after 5:00pm on a business day at the location specified in the address for that party, or on a day that is not a business day, then the notice is considered received at 9:00am on the next business day.

11.5 Severability. This section deals with what happens if a portion of the Contract is found to be unenforceable. If that’s the case, the unenforceable portion will be changed to the minimum extent necessary to make it enforceable, unless that change is not permitted by law, in which case the portion will be disregarded. If any portion of the Contract is changed or disregarded because it is unenforceable, the rest of the Contract is still enforceable.

11.6 Signatures. The Client and the Contractor must sign this document using Bonsai’s e-signing system. These electronic signatures count as originals for all purposes.

11.7 Governing Law. The laws of the state of Colorado govern the rights and obligations of the Client and the Contractor under this Contract, without regard to conflict of law principles of that state.

11.8 Entire Contract. This Contract represents the parties’ final and complete understanding of this job and the subject matter discussed in this Contract. This Contract supersedes all other contracts (both written and oral) between the parties.


Acme company

Prateek Maitra, Owner/Operator

First Name
Last Name
Acme LLC.
First Name
Last Name
Corporation Corp.