10 TIPS ON PREPARING EFFECTIVE

EMPLOYMENT CONTRACTS
By: Atty. PoL Sangalang
Sangalang & Gaerlan, Business Lawyers

TIP #1: Be mindful of the 3 essential elements of a valid contract.

1. Mutual Consent; 2. Consideration (or Cause); and 3. Object (or Purpose).

TIP #2: Contract should be easy to prove in court as a supporting evidence.

Preferably, it should be written, signed, witnessed and notarized.

TIP #3: Contract should assert management’s rights and prerogatives.

It should also emphasize the obligations and responsibilities of employees, such as: 1. to work
diligently; 2. to fully support company goals and activities; and 3. to faithfully obey all lawful
work-related policies, procedures, orders and instructions.

TIP #4: Contract should anticipate and prevent disputes.

It should regulate common irritants and usual causes of disputes and misunderstanding.

TIP #5: The provisions of the contract should be clear and free from multiple meanings.

Always bear in mind that DOLE officials and the courts will rule in favor of employees
whenever there is a dispute in the interpretation of an obscure, vague or unclear provision of an
employment contract (especially if it concerns rights and benefits).

TIP #6: Keep it short and simple (KISS).

The best way to keep employment contracts short and simple is to have a comprehensive
company personnel policy manual and employee handbook. These may be incorporated as
integral parts of the contract by way of reference.

TIP #7: Contract should anticipate employee movement and status change.

Through the use of annexes, amendments and supplements, the same initial contract would be
able to regulate regularizations, promotions, increases in the compensation and benefits,
transfers, rotations, new or additional job descriptions, etc.

TIP #8: Language and discussion clauses.

This is important in establishing consent when there’s a language barrier.

TIP #9: Notice and electronic evidence clause.

Notices of disciplinary actions and other notices can also be validly sent to employees via email,
text, chat, and online messaging provided that the employees consented.

TIP #10: Liquidated damages, forfeiture, offsetting and waiver clauses.

These clauses should be written in the contract, and not just in the company policies, because
they require the employees’ consent.

BONUS TIPS:

Probationary employment

Performance improvement plan (PIP) and values improvement plan (VIP)