Employment Contracts – challenges and evolution in a changing market

With the employment marketplace rapidly evolving, there is increased pressure on organisations and executive candidates when exiting and negotiating employment relationships.

In a recent breakfast seminar, I teamed up with employment lawyer George Haros from Gadens to provide insights into what we are experiencing from both an executive search and legal perspective, on the challenges and evolution of employment contracts in a changing market.

Why has this topic become a key focus for employers and employees, attracting so much attention right now?

There are two times when employment contracts are reviewed. Just before you start a new job and just before you leave.

The overriding reason employment contracts are being tightened is because “competition for any worker is fierce, and for top talent it’s unprecedented”, so to retain great staff or at least make the job of replacing them easier, employers are reviewing employment contracts with a specific focus on restraint clauses and notice periods.

Organisations want to deter their people from leaving… but if their employees do leave, employers don’t want to risk losing clients/customers. Organisations also risk losing IP, market intelligence and market share when their people depart.

It’s becoming more expensive to replace and retrain when key positions are vacated, and the risk is magnified when talent goes to the competition. They know too much!!! Hence restraint clauses are being tightened. This includes: protection of IP, trade secrets, poaching customers, poaching employees, joining competitors (at least for a period) and what specific knowledge, data or other information can be taken or shared. It can even include LinkedIn contacts.

Any turnover has an impact on organisational reputation (whether the departure is regretful or welcomed) and no one wants to give the competition an advantage. Another way to protect the organisation and their standing in the market – especially if the departing employee is moving to a competitor – is to place them on Gardening Leave. This takes the person ‘out of the market’ for three to six months, therefore diluting their knowledge, contacts, and relationships.  

Another key trend we are seeing is that notice periods are now being extended, depending on the difficulty for the role to be replaced. For example, four weeks may be extended to six weeks or three months extended to six months.

Other great advice provided during the session included:

• If Gardening Leave is not stipulated, it is not necessarily enforceable
• It’s important to clarify whether enforceable restraint commences from date of resignation or from last day of employment
• Consider withholding some of the payout until after the restraint period has ended

These trends are designed to protect the organisation from loss (or at least act as deterrents from leaving); however, as I shared with our audience, the flip side to this is to focus on retention. Don’t wait until you’ve lost your valued people and find out why they are leaving during their exit interview. Instead, review, refresh and re-state your Employer Value Proposition (EVP). This is the best strategy to retain your best employees. “A well communicated EVP is a talent retention superpower.”

Some final takeaways:

1. Flexible work arrangements are here to stay, so embrace them and make them work for your organisation. Ask your teams how they can do their best work while balancing collaboration, learning, contributing to the culture of the organisation and relationship building.

• Phantom stock is on the agenda. Letters of Offer are including penalties if the person signs and then reneges on the contract.

• Just when you’ve lined up all your processes and made the final offer to your potential new employee, be prepared for counteroffers by the existing employer. As I’ve said to my clients, be prepared to adjust your budgeted salary costs this year and next. Increase salaries out of your normal salary review cycle and add sign-on bonuses to get new talent over the line.

Savvy organisations are using talent retention tools to help with these challenges. Speak to us if you you’d like to know more. We encourage you to continue the conversation on our socials with the hashtags #Gadens #TRANSEARCHau #employmentcontracts.