An important question for your upcoming succession - Do you have employment agreements for all your team?
Perhaps you have long-term employees who originally joined you with a handshake and the matter has never been revisited? Perhaps you have been meaning to address this matter, but it has continually been deferred? If this is your situation, you should be feeling extremely nervous right now, as your entire business might be at risk, and as well, potentially, your whole succession strategy!
From an employee perspective, it is not mandatory to have an employment agreement, as their rights (10 minimum entitlements) are protected by the National Employment Standard (NES), whether they have signed an agreement or not. From an employer’s perspective, there are many benefits in having employment agreements in place, but one significant benefit is the protection employment agreements provide to your upcoming succession strategy.
An employment agreement will typically contain clauses addressing:
Annual Salary / Remuneration Package
Restraint and confidentiality to protect your business goodwill; and
Dispute resolution processes
From your practice succession perspective, restraints and confidentiality are critical elements that need to be protected.
During your succession journey, for many practitioners, it will be their practice goodwill that will be sold, which is very much bound up in the relationships with clients. If you have employees who have strong and important relationships with clients, without appropriate contractual restraints, you are at risk of not protecting your business. A restraint clause is a mechanism to protect the goodwill of your practice. Of course, you cannot stop anyone from earning a living, but employment agreements are a useful method to provide some level of protection for your business.
Being employed in a professional office, employees are exposed to confidential information on a daily basis. An employment agreement provides both your practice and your valued clients, protection around confidential information.
For your valued employees, if a new owner takes over your practice, it is likely they will have all employees sign new employment agreements. Typically, if there are specific items in employment arrangement that should be retained e.g., specific working arrangements, an employment agreement is a great way to lock this in and protect their position.
From your successor’s perspective, particularly if your successor is external to your practice, not having employee agreements will raise some real concerns from their perspective. At the very least, they will see real risks with employees not having signed an employment agreement, and therefore not being subject to any contractual restraint and/or confidentiality. This may very well have a negative impact on your practice price and/or retention mechanisms.
In short, if you don’t have employment agreements in place with all staff, make this a priority today.