6 key contracts every small business needs
If you are starting or running a small business, you must meet your legal obligations. A crucial part of running a business is preparing the appropriate documentation and entering into contracts, whether it be a contract with your employees or a Privacy Policy.
This article will outline six key contracts you will likely need in your small business.
1. Employment Contracts
An employment agreement is a legal agreement between you and your employee, which outlines the terms and conditions of your professional relationship. Within an employment contract, you generally need to include five key terms. These are explained in the table below.
| Term | Explanation |
| Pay Terms | It is crucial that you include pay terms (in line with national minimum wages) in an employment contract. However, your business may fall under an industry with a Fair Work award. In this case, the terms regarding pay in an employment agreement must reflect the terms of the relevant award. |
| General Standards: Hours, Leave, Termination | The Fair Work Commission has issued the National Employment Standards (NES) which outlines the general conditions and standards of employment, required in an employment contract. Your employment contract should outline the hours an employee should work, the leave they are entitled to, and reasons for termination or redundancy. |
| Restraint of Trade/Non-Compete Clause | In some circumstances, you may be concerned that your employee will share trade secrets, intellectual property, or business information with rival companies. To help prevent this from happening, you might consider including a restraint of trade or non-compete clause in your employment contract. |
| Confidentiality Clause | In some circumstances, you may be concerned that your employee will share confidential information about your business. In this case, you might consider including a confidentiality clause in your contract. |
2. Service Agreement
If your small business works with clients, you will need a service agreement. This should outline the key parameters of your professional relationship, including:
- the scope of your services;
- timing of payments;
- how you will limit liability; and
- how you will resolve disputes if they arise.
You should also include the particulars and commercial terms of the arrangement, such as the party names, pricing or important dates, which will vary depending on the client.
3. Contractor Agreement
When your small business works with contractors, you will need an agreement in place. Whilst some contractors may have their own agreements, it is beneficial for your business to have its own agreement in place. However, this largely depends on the individual circumstances. Your agreement should detail the:
- services offered;
- period of the arrangement;
- contractor’s obligations;
- confidentiality and intellectual property obligations; and
- parties’ liabilities, including any insurance requirements.
4. Commercial Lease
If your business requires a bricks and mortar space, you will likely need a commercial lease agreement. This agreement will set out the rights and obligations of the landlord/lessor, as well as your rights and obligations as tenant/lessee.
Most commercial leases will include the following key clauses addressing:
- rent, including how often the landlord can review the rent price;
- whether you need to include a security bond, and the amount;
- responsibilities for outgoings, such as electricity and gas bills;
- who will pay the legal fees for the preparation and negotiation of the lease;
- which party is responsible for repairs and maintenance;
- whether the tenant must pay for insurance; and
- what happens if either party does not comply with the lease.
5. Privacy Policy
It is common for many small businesses to collect or use personal information, especially if you have a website. Therefore, your small business must have a privacy policy. This policy outlines how you will manage personal information in an open and transparent way so that it is clear you comply with the Australian Privacy Principles (APP) and the Privacy Act.
Your privacy policy must outline:
- what personal information you collect;
- how this information is used or disclosed;
- how the information is stored; and
- the client’s right to contact you, unsubscribe, and complain.
6. Terms of Use
If your small business has a website, it is also a good idea to have Terms of Use. This document outlines the rules that all visitors to your website must abide by and any behaviour that is prohibited. You should also include a disclaimer to limit liability when they access your website.
Key Takeaways
If you run a small business, it is important that you have the right documents and contractual agreements in place. Whilst every business is unique, most businesses will need to enter into employment agreements, service or contractor agreements, and commercial leases. It is also crucial to have a privacy policy and terms of use.
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