What Are Terms of Employment?

Terms of employment are the responsibilities and benefits of a job as agreed upon by an employer and employee at the time of hiring. These generally include job responsibilities, work hours, dress code, vacation and sick days, and starting salary. They may also include benefits such as health insurance, life insurance, and retirement plans. It is an element of the ISM Manufacturing Index's calculations.

Key Takeaways

  • Terms of employment are the benefits and responsibilities that an employer accepts in taking a job.
  • 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

Job seekers whose skills are in high demand will have an advantage when negotiating terms of employment. Executive-level jobs also generally include negotiations over the terms between the hiring manager and the candidate.

Most employers require professional, administrative, and executive employees to sign a written employment agreement or contract that details the terms of employment. Hourly employees typically don't have to sign a contract, and their terms of employment often are outlined in an employee handbook or company policy manual.

In the U.S., employment contracts are "at will," meaning that either the employer or employee can legally terminate the agreement at any time for almost any reason.

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

Whether it's an executive position or an entry-level job, terms of employment are subject to state or federal guidelines. Written terms of employment can protect both the employee and the employer.

Special Considerations for Terms of Employment

In the U.S., employment contracts are "at will," meaning that either the employer or employee can legally terminate the agreement at any time for almost any reason. (Employees are protected from discrimination due to race, gender, or religion.)

At-will employment allows an employee to be fired even if no terms of employment have been violated. In practice, employees who have contracts generally have a degree of job security for the length of the contract as long as they do not violate the contract conditions. Some states have an exception to the at-will policy that gives some protection to an employee who is fired without good cause.

Minimum standards for terms of employment in the U.S. are set by the Department of Labor. They include rules covering the minimum wage, over time, the standard workweek, mandated break times, and safety issues. State laws may add additional benefits, rules, or rights regarding employment within their jurisdictions.

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 a 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.

These kinds of benefits may not be included in your next terms of employment, no matter how hard you bargain.