Hiring your first full time remote staff? Or maybe you’re an experienced online team manager just looking for a more formal agreement to have your remote employees to sign and feel more part of the team.
Then today’s guide is for you – a rundown of making a contract with remote employees (technically contractors).
Disclaimer – This Is Technically Contractors And This Is Not Legal Advise
Before we dive into today’s post, want to get this off our shoulders – the free template we will provide you for signing with your remote staff is that – FREE. Therefore, we cannot be held liable if this contract doesn’t suit your specific company needs and should be used as a starting point brainstorming topic for you and your management to discuss.
Also, this is meant to be used for contractors. While in my multiple businesses we call them employees, technically because we do not have a registered company in that country (for example Philippines), we cannot legally hire them as full time staff.
What is the difference between a full time employee and a full time contractor?
Basically, taxes and benefits.
By having a company registered in a country where you are hiring a full time employee, they will get the healthcare benefits, any kind of retirement fund schemes, and tax liabilities in that country / state / city. If you are hiring them and do not have a company registered there, then you are technically hiring them as a contractor. Or more technically, freelancer.
The proper way to do this for tax purposes is ask each person to register their own consulting company, and you hire them by making a contract from your business to their new consulting business. Then the law is from your company in your country to their company in their country. Yet, we don’t expect freelancers in Philippines to register companies, and simply make it a contract from our company (often Hong Kong) to them as an individual (often Philippines).
We Name It an MOU (Memorandum of Understanding)
We say employee contract, but the title of the contract is MOU, which stands for Memorandum of Understanding.
When I deliver this to a new staff joining the company, I explain that a contract is only as good as the 2 parties (people) signing it. We need to have mutual trust between each other and honor what we sign.
Are we really going to chase the person down and sue them over it? What we have learned in business and life, it isn’t the paper that is being signed, but rather the honor between the 2 people and the clear understanding.
You as the employer need to honor this agreement 100%. I treat them as if they are a “real” employee by giving them time off, and notices and other benefits. Because really, it is what you want to make it. And oftentimes you will save a lot of headaches by having direct MOU with a staff than the traditional route – so pay the 2 weeks notice if you lay someone off – make them trust you.
Major Terms in This Employee Contract Template
Notice I am calling it an employee contract again, because essentially I want to call it that and all of us understand that is what we are following.
Here are some of the major terms and conditions:
Who is who:
Company: What is our company, where is our company based, what is our company ID
Staff: Who are we hiring, what is their address, and ID number (check our employee database guide)
Effective Date:
When are they starting to work with us.
Job role and responsibilities:
What is their title and major responsibilities
IP (intellectual property)
Make it clear that the company owns the work that the employee does.
NDA (non disclosure agreement)
This could be a contract in and of itself, but here we simply put a clause that for 2 years from when the person leaves the company they cannot disclose company confidential information.
Compensation
How much will the employee be paid. How many hours are they working. Any other kinds of bonus structure.
Official Employee
I do add a clause that if we do register a company later in that country, and the employee is on good terms, we can convert this agreement to a formal employee contract in their local country. This is if we ever do register there, we know how to move this contract forward.
Termination Policy
Probably the most important part of this whole agreement. How do we end our relationship? Sadly, most important part for most agreements is what do we do if it doesn’t work out – from either person’s side. If the company wants to lay the person off, I normally give 2 weeks paid notice so that the employee has time to find a new job. From the employee side, this rarely does happen but I ask them to give us 2 weeks notice to find a replacement. But I have added that if they leave immediately without notice, then any outstanding unpaid salary will not be paid. This has been used, as this is not fair to the company to leave without going a company time to recover.
Client Payments
If this staff is dealing with customers, it is good to make it clear where the sales proceeds will be going.
Jurisdiction
What country will this contract be effective under. Because we are in Hong Kong, and the court system is in English and similar to UK law, we picked this.
Sign The Contract (online)
Now, we sign. I know this is hard to be done online, but there are plenty of online signature systems out there now (we will have a blog guide soon) .
Filing This Contract
Now, we need to store the contract for future reference. We can (and should) leave it in the electronic signature system we used, but this is also where Regarding Work’s HR system comes into play as well! We can upload this signed agreement to our HR management tool for that new employee and it will be easily accessible by the company, HR team, and employee whenever needed. Maybe a few months later the staff wants to look up what they signed – and they may have trouble finding in various emails and file folders. No problem now with the Regarding Work HR system, it is right on their account for each access and viewing.
Download Our Free Online Employee Contract Today
We hope you enjoyed this post – now it is your turn to take action! Download our free MOU contract we have used for years (with always slight modifications for each team member) and leverage it in your business today.
Don’t Forget – Try Our HR Tool Free Today
Also, support Regarding Work by signing up for a free account of our HR management too today! Add that new employee to your Regarding Work HR account and upload the contract to make it formal.
Signup and Start Today For Free!
It will also show that new employee you are serious about HR and making them happy and comfortable in their business.
Good luck and remember, happy employees is one of the best ways to build a long term evergreen business.