The termination of a long-term employee can cost a business up to two years of salary, benefits, and pension payments for that employee. With the removal of mandatory retirement ages, that liability has increased for everyone.

One way to reduce the risk is by using employment contracts. A well drafted employment contract can limit the amount of money to be paid to a departing employee to a maximum of 8 weeks of salary and benefits.

Employment contracts can be used to protect businesses against the theft of corporate opportunities, employees, customers, and confidential company information.

Because of the substantial restrictions placed on employees through these contracts, the Courts review them carefully before enforcing them. In particular, Courts will examine the specific wording of a termination provision to ensure its validity. Make sure your contracts are approved by a lawyer.

Employment contracts work well for employers when utilized properly. They limit risk and reduce obligations to pay terminated employees following their departure. Caution must be exercised to ensure that the employment contract is property drafted and it must be reviewed periodically to ensure that it is still valid and enforceable.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.