The difference between contracts and policies. And why you need both.

Many employers get confused about the difference between contracts and policies. A business policy and contract are both formal methods of communication that impact a business, its employees and customers.

However, a business policy provides a framework for employees to follow to consistently treat various decisions and situations. A contract is a legally binding document outlining the terms and conditions of an agreement between the business and an employee. Let’s discuss why you need both.

Consider these questions:

  • Do you want to protect your business and database?
  • Do you want to be clear about roles and responsibilities?
  • Do you want to emphasise the importance of your policies and procedures?
  • Do you want to act as a professional and reputable business and employer? 

It is vitally important to have an employment contract that has been designed for your business specifically, to act as protection for you and your investment. 

Many people believe that having policies and procedures in place in lieu of employment contracts is enough to protect their business. But an employment contract is a legal document that binds the employee and the employer on clauses such as notice periods, intellectual property, confidential information, and restraints. 

What is legally binding?

Because employment contracts are legally binding documents, if one party breaches the obligations of that agreement, the other party may have the right to seek legal action. For this reason employment contracts are far less flexible and changeable and they often require legal consultation in order to do so.  

Policy and procedure documents are changeable, adjustable and can move and change with the business as it does the same. Unlike employment contracts, they are not as legally binding and if there is a breach of those policies, it is more likely to result in disciplinary action, rather than legal action. 

Employees feel more comfortable and secure when they are working for an employer that has these formalities in place. Having a proper employment contract as well as a comprehensive employee handbook outlining your policies and procedures is important not only to protect the integrity of your business, but also for the sake of your industry employment reputation.

Does your membership include contracts?

AHC and ABIC members in specific categories have access to an unlimited, comprehensive HR employment specialist service that provides these types of documents as part of their membership, as well as expert and tailored advice. 

Access to these types of resources will no doubt be worth the peace of mind alone! If you are interested in learning more about the benefits of joining the AHC or ABIC, visit their websites at these links:

Australian Hairdressing Council (AHC):

Aesthetic Beauty Industry Council (ABIC):

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