An employment agreement constitutes a binding document that outlines the terms of a business relationship between an employer and an employee. These terms usually include the employee’s position, rights, job responsibilities, working conditions, schedule, and monthly or annual salary. Our simple employment contract template shows how to prepare yours step by step. You can also browse all employee forms and related documents.
Last Updated: October 2026. This guide is reviewed and updated regularly to reflect current law. If you notice an error or outdated information, please contact us.
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An employment contract is used for long-term and permanent positions. You can hire a new employee for a fixed term, for example, six months or a year, or propose a permanent contract with no specific term. The latter is known as an “at-will” contract of employment, meaning that both the employer and employee can terminate the employment relationship at any time. As a rule, the terminating party has only to notify the other party within a specific notice period.
It’s essential to distinguish an employment contract from any other agreement used to hire a new worker. For example, it’s impossible to apply the same terms to an employee and independent contractor or subcontractor. In addition, each of these cases is subject to different laws and will require different IRS forms to be submitted for tax purposes.
An employment contract is a legally binding agreement that helps establish effective and successful working relationships. It’s a primary document that outlines the rights and responsibilities of both parties and formalizes their expectations. Therefore, this agreement must be as detailed as possible. Whether you are an employer or employee, you need to be sure that you sign the contract that meets legal requirements and your expectations. Employment contracts usually include the following terms.
The remaining provisions can also include non-compete and non-solicitation clauses. However, these clauses are controversial since not all states recognize them, and even if they do, they put some restrictions on using these provisions. For instance, in Alabama, you cannot use a non-compete for such professions as doctors, veterinarians, or lawyers. So, you need to consult your state and local laws on the issue before putting these clauses in your contract.
Follow these steps to fill out the FormsPal employment contract template. Each step names a part of the form and says what to enter. If you downloaded the PDF, you can complete it with the online PDF editor. If you feel that you can make a mistake, it’s recommended to get legal advice while preparing the contract of employment.
The screenshots under each step show the FormsPal Employment Contract template filled with sample entries in blue, so you can see where each answer goes. The names, addresses, dates and amounts are examples only.
Decide first whether the job is at-will or for a set term. That answer shapes Section 2 and the termination boxes.
Once the template is filled in, the last stage is review and signature. Read the whole agreement first, because a wrong name or amount is easier to fix before anyone signs.
As we mentioned earlier, employment contracts may be permanent and for a specified period of time. However, the employment relationship may also vary depending on the number of working hours and company needs. Therefore, the main types of employees include full-time, part-time, temporary, and seasonal workers. Let’s have a look at each of these types in more detail.
Since the labor law does not define full-time or part-time employment, each employer is expected to set its own requirements. According to the IRS, a full-time employee is a person who works at least 30 hours per week or 130 hours per month. In general, full-time employees are paid salaries and entitled to more employment benefits, like health and dental insurance, paid vacations, retirement plans, and social security benefits. For full-time employees, their employment is usually the only or primary source of income.
A part-time employee is a person who works less than 30 hours per week. Again, it’s up to the employer to determine how many hours their part-time hires will work. As a rule, these employees are paid hourly and entitled to fewer employment benefits than full-time workers. However, there are other advantages for them, including flexible schedules, additional sources of income, and opportunities to pursue their goals like studying at university or developing other skills.
Many companies need more workers due to seasonal increases in the workload. This happens if the company works in an industry that heavily depends on the season, like tourism, retailing, or fishing. For example, retail employers tend to hire more employees during the holiday season.
As a rule, the employer uses a fixed-term employment contract to formalize their relationships, which terminate together with a specific season. Employers cannot offer benefits, like health insurance, to such employees, but they can propose different discounts or paid time-off to create incentives and show loyalty to all their workers.
Temporary employment is similar to a seasonal one and involves a fixed-term contract of employment. However, such employment relationships do not depend on the season. They are usually established for specific projects and can range from several months to a year. A temporary employee, also known as a temp, can be hired to substitute for the employee leaving the position. As a rule, a full-time temp is entitled to the same benefits as a regular full-time employee. Among temporary employees are interpreters, administrative assistants, couriers, and groundskeepers.
An employer-employee working relationship is regulated by the U.S. Department of Labor (DOL), which enforces more than 180 federal laws. All workers in the U.S. get legal protection related to their labor. We will look at the major regulations regarding a minimum wage, overtime pay, workplace safety, and employee benefits.
Wages and overtime pay are regulated by the Fair Labor Standards Act (FLSA). According to the FLSA, every employee must receive a minimum wage of not less than $7,25 per hour. If an employee agrees to work more than 40 hours per week, they should obtain overtime pay at a rate not less than one and a half times the regular salary. These regulations may vary by state, and if the state provides higher wage or overtime pay, then the state’s laws will override the federal ones.
Every employee is entitled to workplace safety. This right is administered by the Occupational Safety and Health (OSH) Act and includes:
Before signing a contract of employment, an employee and employer agree on specific benefits, like medicare, retirement saving plans, and family leaves. These benefits are regulated by federal laws, such as the Patient Protection and Affordable Care Act (Affordable Care Act), Employee Retirement Income Security Act (ERISA), Employee Benefits Security Administration (EBSA), and others.
Health Insurance. The Affordable Care Act mandates that employers with 50 or more employees must offer health care plans to their workers. Medicare plans are usually offered to full-time employees, but if the employer desires, they can provide such benefits to part-time workers, too.
Retirement Plan. Many employers offer their employees retirement plans to save for the future. The Employee Retirement Income Security Act (ERISA) sets minimum standards for retirement and health plans in the private industry. This Act ensures that the employees are informed about all plan features and funding and guarantees that these benefits will be paid through the Pension Benefit Guaranty Corporation (PBGC).
Medical and Family Leaves. The Family and Medical Leave Act (FMLA), a federal labor law, allows employees to take an unpaid extended leave from work in specific circumstances, including:
Note that while employees are entitled to unpaid time off and leaves, no law requires employers to provide their employees with paid vacation days. Nevertheless, the majority of companies offer this benefit to their workers.
Although it’s not legally required, employers often decide to grant severance pay to employees upon termination of employment. As a rule, this happens when the employment is terminated at the employer’s initiative. The amount of such pay depends on the length of the employee’s employment.
Prior to signing the employment contract, both parties need to ensure they make the right choice. We’ve prepared step-by-step guidelines to help employers with the hiring process and contract signing with their ideal employee. In addition, this guide will help employees who are looking for a job learn what to be prepared for during the application process.
Provide a background check. No matter how you find job candidates, it’s always good to provide background checks. A person may be an ideal candidate for your position, but they may still have criminal records. It’s better to learn about them before making any commitments.
As the employer, you would also want to run a sex offender check. It should be noted that convictions or sex offenses do not automatically deprive the person of the opportunity to find a job, but it becomes pretty challenging for them. You can use such platforms as GoodHire or Accurate Background to run your background checks.
These quick answers cover what people ask most about the employment contract template. They explain what the contract includes, how to fill it out, how a probationary period works and how an employee differs from an independent contractor.
A typical employment contract names the employer and the employee and sets out the main terms of the job. The list below shows the points most agreements cover, from duties and pay to time off and how the job can end.
Work through the template in order, from the date and parties to the signatures. Fill in the parts that apply to your job and leave the others blank. You can also create the document online by answering a few questions.
A probationary or trial period is the period at the beginning of the employment to ensure that the new employee qualifies to get the job role. It’s common to include a trial period in an employment contract. As a general rule, it continues for three months. It’s up to an employer to decide, but the trial period should not exceed six months. Employees working under a trial period are eligible for a salary. However, the amount may be less than the regular rate.
The terms “employee” and “independent contractor” are legally different.
An employee is a person hired for permanent or fixed-term employment and paid a salary. They may be entitled to several benefits, including health insurance, retirement planning, paid vacations, and different corporate discounts. At the beginning of their employment, employees should file Form W-4, known as the Employee’s Withholding Certificate, to inform the employer how much to withhold from the employee’s salary. The employee’s earnings are also subject to social security tax and Medicare tax withholdings.
An independent contractor is a person or entity hired to perform certain services. They may work permanently or during a specific project. An employer does not pay taxes for independent contractors. They have to do it independently by filing Form W-9 to the Internal Revenue Service (IRS). Independent contractors are not entitled to any employment benefits. An independent contractor is also referred to as a freelancer or simply a contractor.
Shortly speaking, an employee works for the company, and the company is responsible for them. An independent contractor is a self-employed person and responsible for themselves.
General information, not legal or tax advice.
