Employees · Employer

What is the must-have language that needs to be included in employment agreements at early stage startups?

Gurpreet singh Operations Project Manager at Code brew Labs

Last updated on October 23rd, 2017

A few months ago a company that I am advising finished putting together a first draft business plan. They are now looking to hire a small and essential team that can help with improving its prototype and move forward to the next step before they start looking for investors. They have several good candidates, but I still haven't hired anyone because they want to have in place a clear agreement before in order to avoid any problems or misunderstandings in the future.


Do you have any advice on what should be included, or perhaps any experiences when executing these agreements?

Lesa Hammond Co-founder & CEO ProfHire, Inc.

October 23rd, 2017

If the employee is an independent contractor, you are basically doing a work for hire agreement where you lay out exactly what you need them to do and how much the pay is for that work. Termination terms should also be included, meaning you can terminate the contract at any time.


If it is a payroll employee, you want to have a clear job description that has wiggle room. Identify essential duties but don't list every task. Provide salary, number of hours you expect them to work for that salary is it a .5 or 1.0 full time equivalent job. List any benefits you are providing or that you do not provide at this time. Make sure that you use the term total compensation for explaining salary, benefits and any perks. If you are providing stock options be clear about any stock / stock options you are providing.


Make it employment at will and you have the right to terminate the agreement at any time.


In both cases, have them sign the agreement and a non-disclosure.

Josh Aguirre

October 23rd, 2017

Hi Gurpreet, thanks for your question and for allowing me the opportunity to answer. I've been working with freelancers worldwide for just under 6 years. In my experience, I've collected all the most valuable legalese to suit the standards of my business needs. I'm not sure if they will be helpful to you, but we now host them all online for free here: Invenst Free Resources


If none of those work for you, I can work with you personally to draft up something that fits their business. Also, all the information I give you via my site is free.


Cheers!

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Andre Sr. Managing Partner | Business Funding | Speaker | Mentor

October 23rd, 2017

There are many things that need to be included, however; the things that we often see missing to the detriment of the company are these two. If you are doing a PPM you the must have language is a "Drag along clause". Whether its a Private Placement or Reg D, you must have an agreed upon exit amount, so if you are securing another series of capital, the first round if they are not participating in the subsequent rounds can easily be made whole and not create any conflict with new money. God luck!

Chris Larkin Expert in business, strategy, sales, and leadership. Highly creative too

October 26th, 2017

At Will, as in hire and terminate At Will.

Paul Garcia President at TABLE

October 27th, 2017

It's difficult to say without knowing in which country you will be hiring people. It makes a difference because labor is regulated differently in India versus other locations. Depending on whether your employees have a stake in the company or they're salaried, hourly, or on contract, different types of written offers for employment are commonly used. Can you elaborate what type of employee situation you intend and where?