Many employment contracts are ‘standard-form’ contracts that don’t take into account your specific circumstances. Given that executive-level employment contracts often contain complex remuneration packages and post-employment restraints that can have long-lasting implications for your career, it’s particularly important for you to make sure your contract is suitable. It’s also worth noting that people in executive positions don’t usually benefit from a collective agreement or award, which is another reason to ensure your rights are adequately protected in your contract.
Potential terms you may consider negotiating include:
- Job Description and KPIs – It’s is critical that you know what is expected of you, and how your performance will be measured. Many employers fail to take the time to properly set out a clear job description and associated KPIs. Take the time to know what is expected of you, and that the description matches the role you were offered.
- Remuneration and benefits – You may seek to negotiate components of your remuneration package, such as performance bonuses, allowances and future pay adjustments. Also consider if the contract sets out any performance indicators used to determine remuneration, and how performance reviews will be conducted (as noted above).
- Employee option or share grants – Many employers offer the opportunity to take up ‘equity’ in the form of options and shares in the employer entity. You will need to consider the amount of equity you are granted, the vesting terms, and the tax consequences at the time of grant and exercise. Quite often your entitlement to participate in these schemes will be mentioned in your contract, but it may be missing key details.
- Post-employment restraints – It is quite common for executive contracts to include ‘non-solicitation’ clauses and ‘restraints of trade’. These clauses will have a material impact on you when your employment ends (which is likely to do, as least at some stage…) A restraint of trade may prevent you from setting up or working for a competitor within a particular geographical area. A non-solicitation clause will prevent you from soliciting the business of any of the employer’s clients. How long the restraint is enforced and the geographical area of the restraint are both issues that may be negotiated.
- Termination – You may want to negotiate the notice period required, or include a clause protecting you from unjust termination. This is particularly important if your remuneration is over the high-income threshold.
- Gardening leave – These provisions require executive employees to take an extended period of paid leave at the end of their employment. This may prevent you from working for another employer or starting your own business for the period of the leave. Consider whether you would want such provisions altered.
This list is not exhaustive – what should be included in your executive employment contract will depend on your workplace, the industry you are operating in and your personal circumstances and preferences.
We can help you to review your contract by providing advice on the meaning and potential operation of key clauses and assist you to negotiate necessary amendments.
If you have been presented an executive employment contract invest a little time now to set yourself up for success. Call us on 02 9331 0266 for a no-obligation and confidential chat.