Terms of Employment: Definition and Examples

What Are Terms of Employment?

Terms of employment refer to the responsibilities and benefits associated with a job as agreed upon by an employer and employee at the time of hiring. These terms, which may also be referred to as conditions of employment, generally include job responsibilities, work hours, dress code, time off the job, and starting salary. They may also include benefits such as health insurance, life insurance, and retirement plans.

Although terms of employment may be agreed upon verbally, employees and employers normally sign written contracts. But, if you are an at-will employee, your employer can change the terms of employment, including your salary, hours, and worksite, at any time.

Key Takeaways

  • Terms of employment are the benefits and responsibilities that an employee agrees to when they accept a job.
  • Terms may include things like salary, benefits, retirement, company policies, termination, and non-compete agreements.
  • Executives and workers with skills that are in demand generally have some bargaining power in their terms of employment.
  • The minimum terms of employment are set by the U.S. Department of Labor.

How Terms of Employment Work

Most employers require professional and administrative employees, as well as executives to sign a written employment agreement or contract that details the terms of employment. The conditions of employment for hourly employees are often outlined in an employee handbook or company policy manual. In certain circumstances, terms may also be expressed verbally. Written terms, though, can protect both the employee and the employer.

In addition to the nuts and bolts of salary and benefits, terms of employment can specify touchy issues such as dispute resolution, nondisclosure or non-compete agreements, and grounds for termination, as well as the possibility of a notice of termination.

Job seekers with skills in high demand are often able to negotiate better terms of employment. Executive-level jobs also include negotiations over the terms between hiring managers and candidates. Whether it's an executive position or an entry-level job, terms of employment are subject to state or federal guidelines.

Minimum standards for terms of employment in the U.S. are set by the Department of Labor (DOL). They include rules covering the minimum wage, overtime, the standard workweek, mandated break times, and safety issues. The department also governs employment laws in certain industries, such as agriculture, mining, and construction. State laws may add additional benefits, rules, or rights regarding employment within their jurisdictions.

Make sure you read the entire employment contract offered by a prospective employer before you sign. If you're unsure, it's a good idea to have an attorney take a look at it.

Special Considerations

Employment contracts are normally considered at-will in the United States. This means that either the employer or employee can legally terminate the agreement at any time for almost any reason. At-will employment allows an employee to be fired even if no terms of employment have been violated. Employment laws protect workers from discrimination due to race, gender, or religion.

In practice, employees with contracts generally have a degree of job security for the length of the contract as long as they do not violate any contract conditions. At-will laws don't apply in Montana—the only state of its kind—so employees can only be terminated for good reason.

The at-will rule also doesn't apply to individuals who are part of labor unions. These organizations help protect workers' rights by negotiating benefits and other employment conditions, including terms of termination. Employees who work under unions have set contracts and can't be terminated at-will thanks to collective bargaining agreements.

Terms of Employment Abroad

Most developed and developing countries have codified certain standard terms of employment. Ireland has its Terms of Employment (Information) Act which outlines rules covering a variety of workplace and labor topics. Australia's Fair Work Ombudsman sets rules related to pay, leave, redundancy, entitlements, and more.

U.S. labor laws are not generous compared to those in other parts of the world. The European Union, for example, mandates that workers get at least four weeks of vacation every year. In Finland, expectant mothers get paid leave at least six weeks before their due date, and 15 more weeks after the birth of a child. Benefits like these may not be included in your next terms of employment, no matter how hard you bargain.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. U.S. Department of Labor. "Wages and the Fair Labor Standards Act." Accessed Nov. 19, 2020.

  2. U.S. Department of Labor. "Employment Law Guide." Accessed Feb. 7, 2021.

  3. U.S. Department of Labor. "State Labor Laws." Accessed Feb. 7, 2021.

  4. Legal Information Institute. "Employment-at-Will Doctrine." Accessed Nov. 19, 2020.

  5. Montana Department of Labor & Industry. "Wage and Hour FAQs." Accessed Feb. 7, 2021.

  6. Workplace Fairness. "All About Unions." Accessed Feb. 7, 2021.

  7. Government of Ireland. "Terms of Employment (Information) Act, 1994." Accessed Nov. 19, 2020.

  8. Australian Government. "Fair Work Ombudsman." Accessed Nov. 19, 2020.

  9. The European Union. "Working Hours." Accessed Nov. 19, 2020.

  10. The European Union. "Employment, Social Affairs, and Inclusion: Finland -- Maternity and Paternity." Accessed Nov. 19, 2020.

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.