When hiring employees and independent contractors for your startup, it's crucial to have clear and legally compliant agreements in place to protect both your business and the individuals you are engaging. Surprisingly often no agreements are put in place at all when hiring first employees or engaging with independent contractors for the first time.
Every business has different needs when it hires a new employee. But regardless of company size or industry, it is always a good idea to present new hires with a template employment agreement or independent contractor agreement outlining some of the critical terms of the employment relationship and the independent contractor relationship to set initial expectations, introduce your culture, and minimize future legal risk. However, when setting-up the template agreements, the startup should ensure to draft the agreements in an easy-to-understand manner, eliminate superfluous wording and consider that the employment agreement suggests the startup's corporate culture, a crucial element in attracting (new) talent.
For this purpose, employment agreements in Germany usually provide for the following elements:
- Personal Information: Name and address of the employee and the employer.
- Start date: Clearly define the start date for the agreement and the first day of work (if different).
- Job Description: Clearly define the employee's role, job title, responsibilities, and reporting structure.
- Compensation: Specify the salary, payment frequency, and any bonuses or incentives.
- Working Time, Secondary Occupation: Outline standard working hours, overtime policies, and any flexible working arrangements.
- Home Office:Clearly define if and to what extent working from home shall be allowed.
- Expenses and Travel Costs.
- Probation Period: Include details of any probationary period, typically up to six months.
- Benefits: Describe any benefits offered, such as health insurance, pension contributions, and vacation days.
- Termination: Define the notice period for termination by either party and any conditions under which the contract can be terminated.
- Confidentiality: Include a confidentiality clause to protect sensitive business information.
- Non-Compete and Non-Solicitation: If applicable, include clauses to prevent the employee from competing with your business or soliciting your clients or other employees for a specified period after leaving the company.
- Data Protection: Ensure compliance with GDPR by including clauses related to data protection and privacy (if applicable).
- Inventions, Intellectual Property Rights: Specify that any intellectual property created by the employee during their employment belongs to the company (if applicable).
- Cut-off periods.
Agreements with independent contractors (Dienstvertrag or Werkvertrag), usually provide for the following elements:
- Scope of Work: Clearly define the services to be provided, including specific tasks, deliverables, and deadlines.
- Compensation: Specify the payment terms, including rates, invoicing procedures, and payment schedules.
- Duration: Define the term of the agreement, including start and end dates, and conditions for renewal or extension.
- Confidentiality: Include a confidentiality clause to protect sensitive business information.
- Non-Compete and Non-Solicitation: If applicable, include clauses to prevent the contractor from competing with your business or soliciting your clients or employees during and after the contract term.
- Data Protection: Ensure compliance with GDPR by including clauses related to data protection and privacy (if applicable).
- Intellectual Property: Specify that any intellectual property created by the contractor during the contract period belongs to the company (if applicable).
- Termination: Define the conditions under which the agreement can be terminated by either party, including notice periods and any penalties for early termination.
- Independence: Clearly state that the contractor is an independent entity and not an employee, to avoid any misclassification issues.
By having these agreements in place, you can protect your business interests and ensure a clear understanding of expectations and obligations for both employees and independent contractors.