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Crafting an effective employment contract

Crafting an effective employment contract

As an employer, crafting an effective employment contract is critical to the success of your business. Not only does it establish the terms of the employment relationship, but it also protects your company from potential legal disputes down the road. In this blog post, we'll discuss some tips for crafting an effective employment contract that benefits both you and your employees.

Do you need to set up an employment contract?

As a Cooach client, you can access templates, Q&A, and expert help via Slack. If you are not already a customer, you can still register for a free account, where many templates (such as the employment contract template) are available.

Here you can log in or register an account, free or paid, depending on your current needs.

Please continue reading this post if you are curious about general information on crafting effective employment contracts. Cooach operates in Europe and helps companies achieve growth. This text is based on European standards.

Legal scope

Consider the necessary scope based on your business, the role the incoming employee will have and what tasks are involved. Do you need clauses on non-solicitation, customer protection, and penalty/compensation? If yes, involving legal expertise to set up the template for your employment contract is a good idea.

Specify the parties

You need to specify which party is the employer in the case of multiple companies within the group. It should also be clear that the person being entered as the counterparty has the authority to sign an employment contract.

Specify position/title

This is usually evident if you hire a person who has undergone a recruitment process. Otherwise, the dialogue with the employee should have been transparent regarding the position/title before the agreement is sent over.

Specify the first day of employment and primary workplace

For example, the primary workplace can be in your office or completely/partially remote. To correctly manage and divide work in the future, it’s crucial to be clear when creating the employment contract.

Specify the employment form

The employment form governs conversion rules and preferential rights. Specify if it is a permanent or fixed-term contract. Permanent employment can begin with a trial period of a maximum of six months if you consider it necessary.

Fixed-term employment can be a substitute, or you have identified a temporary need (special fixed-term employment). If you only need an employee for specific occasions, specify a special fixed-term employment with an hourly wage.

Specify the working hours

Full-time employment assumes 40 hours per week unless otherwise specified in a collective agreement. Here, you specify what the employer and employee have agreed on in terms of scope.

The employment covers specified periods in the time report. Otherwise, the employment is subject to applicable legislation.” Specifying what overtime compensation looks like for the current employment is also essential.

Specify the notice period applicable to the employment

You can include a longer notice period from the start but can´t apply a shorter one than the law implies. This may also be regulated if you have a collective agreement in the workplace.

Determine the form of compensation

When it is clear how many hours per week the employee shall work the usual practice is a monthly salary. When there is no clear need for a certain number of hours per week, it is common to set up a fixed-term employment with hourly pay, for a temporary need.

Salary review

Specify in accordance with what is stated in your internal policy or collective agreement. The most common practice is to have an annual salary review where you, as the employer, also evaluate the employees’ performance.

Vacation and advance vacation (this part is based on Swedish vacation law)

In Sweden, employees have the right to take 25 days of vacation per year, regardless of age or employment type. If there’s a collective agreement, there might be additional regulations for more vacation days, which could also be mentioned in the company’s policies. It’s possible to agree on more vacation days than the legal or agreed amount, but never less than 25 days.

Vacation pay refers to earned compensation that hasn’t been taken yet. It can be paid out when an employee takes their earned vacation or leaves their job.

Some companies also have the option to offer advance vacation, which is paid vacation that is taken before it is earned. Specify in the agreement what applies to the category of employees you are now writing the agreement for.


Under “Other,” you can specify essential details related to the individual employment agreement. This may include a bonus model, an attachment related to the agreement, or whether this agreement replaces a previous one.


When you have filled in the agreement and carefully read through all parts, you should also ask the employee to check all information before signing to get an accurate agreement.

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