For many small businesses, growth and success often necessitate hiring more employees. While this expansion is positive, it also introduces new risks to the operation.

Most small businesses lack dedicated legal or human resources departments to safeguard the company’s interests as an employer. Fortunately, there’s a straightforward solution to mitigate the risks associated with an expanding workforce: employment contracts.

Incorporating employment contracts into your hiring process is an effective way to protect your business from liability and establish clear boundaries for your employees. Although traditionally reserved for executive hires, many companies now use employment contracts for all new employees—from sales to customer support—because they reduce liability risks and clarify company policies for everyone.

Clearly outlining your expectations in writing also helps build employee confidence and strengthens the employee-management relationship.

What’s In an Employment Contract?

A written employment agreement, signed by both you and your new hire, safeguards your intellectual property rights and confidential information. It establishes an “employment at will” relationship, reducing the risk of unfair termination claims. The contract can also include non-compete and non-hire clauses, preventing former employees from poaching your staff or clients.

Employment contracts typically address fundamental aspects of employment, such as compensation and benefits, as well as any policies and procedures you wish to enforce for all team members.