Negotiating an executive employment contract

Executive-level positions provide more than a salary – your remuneration package may include benefits such as bonuses, accommodation, travel, share options and commissions. Your ability to work, or not work, may also be restricted by your employer. Therefore, it’s vital to review and negotiate the terms of a contract before you take on a new role.

If you’re in a senior managerial or executive position, you’re unlikely to be covered by any form of collective agreement or award. Instead, your employment contract generally forms the basis of your employment rights. Having said that, you still have the benefit of the National Employment Standards within the Fair Work Act.

There may be documents that outline agreements you’ve made directly with your employer, such as bonus schemes and retrenchment policies. There may also be company-wide policies that apply to all employees in your workplace. However, when your employment conditions can be gained from various sources they can be seen as guides for the employer rather than part of a contractual agreement, so it’s advisable to seek a binding agreement for your rights where possible.

Terms to consider negotiating

During a negotiation process you may not receive everything you request, so think about the things that are most important to you and make sure they are a priority in your negotiations. For example, guaranteed ongoing commission payments that form a significant portion of your income might be important to your financial security, or, if you’re considering having children during the next few years, a parental leave clause might be a key item you want to include.

Other things to look out for include:

    • If you have incentive schemes in place, make sure they aren’t completely discretionary (for example, where the employer has the right to review the payment of a bonus).
    • Almost every draft contract I have seen gives the employer the right to terminate the employment with four weeks’ notice. If you want some protection from dismissal built in (keeping in mind that you don’t have access to unfair dismissal laws when you earn over $140,000 per annum), then you can build that into your contract. For example, a sentence such as ‘the employer must have just cause for terminating the employment’ can be effective, or a clause that allows you to respond to the reasons for termination before the decision takes effect.
    • If your new employer has a strict restraint of trade restriction, you need to ensure there is an exemption on this for clients you have brought with you. This will help to make sure you can take those clients with you when you leave this employer.
    • Look at restraint of trade clauses generally, because employers often try to make them as broad and onerous as possible. You can negotiate on the length of time to which a restraint is enforced, or minimise the geographical area of the restraint.
    • Most contracts discuss the company’s policies that are binding on you as the employee, but not on them as an employer. If you want these policies to be binding on the employer as well, it may need to be stated in the contract. This might apply when, for example, a parental leave entitlement is stated in a company policy, because it can be discretionary or changed without notice. Make sure your employment contract covers all the conditions relevant to your employment.

The contract negotiation process

The best time to negotiate is at the start of your employment, not later when things are going pear-shaped.

When an offer of employment has been made, you can ask to see a draft of the employment contract. If you wish to negotiate the terms of the contract, you’ll need to move quickly in order to show the employer that you are interested in the role, and to make a good impression. It’s important to act professionally and calmly during the negotiation process. Make it clear that you’re keen to take on the position, however you would like to negotiate the contract. Do your best to have the negotiations completed within one week at the most.

It can be a good idea to draft the changes you would like made to the contract so there is no ambiguity about what you want.

If you’re unsure about what you can negotiate or how to go about it, you should seek legal advice. This is particularly useful if there are complicated or unusual clauses to be negotiated, such as a share-based incentive scheme which may expose you to risk, or if you’re taking on a director role in addition to your executive duties.

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Giri Sivaraman

Maurice Blackburn Brisbane
Giri Sivaraman is a Principal at Maurice Blackburn. He is the head of the firm’s Queensland Employment law department based in Brisbane, which is listed by the highly respected Doyle's Guide to the Australian Legal Profession as one of two top tier law firms for ...

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