Hiring Your First Employee

When your start-up entity is ready to hire its first employee, it is an exciting time. However, it is also an important step that you want to make sure is handled correctly. You should consider using an employment contract that establishes the relationship between you as the employer and your employees. Having your agreement in writing ensures that everyone is on the same page, as well as also preventing disputes and possible litigation in the future.

• Payment . The employment contract should set forth how the employee will be paid (salary, hourly wage, commissions, bonuses, or a combination of these). Any criteria that must be met in order for the employee to receive payment should be outlined clearly.
• Benefits . Any benefits that are being provided to your employees should be covered in the employment contract. This includes health insurance, retirement programs, vacation or sick leave and any other benefits. If there are any conditions that must be met (term of service) before exercising the benefits, they should be set forth.
• Stock . It is common for a start-up company to recruit employees by offer equity in the company. The employment contract should address all the details of the equity grant, including the type of stock, exercise price, vesting period and acceleration of options.
• Confidentiality . If you do not require your employees to sign a separate confidentiality agreement, the employment agreement should contain a provision covering what constitutes protected information as well as the consequences of violating the confidentiality provision.
• Termination . It is imperative that the employment contract define the term of employment or clearly state that the employment is “at will.” The agreement should include the grounds upon which the entity can terminate an employee and what type of compensation may be paid, if any. You may also want to consider including a covenant not to compete.