Conditions of employment are the terms, requirements, and policies an employee and employer agree to in their working relationship as outlined in an employment agreement.

Conditions of employment, or terms of employment, spell out the rights and obligations of the employer and employee in a written employment contract.

The employer and a new hire must understand and agree upon these conditions of employment to begin the work arrangement and ensure a transparent, healthy, and mutually beneficial employer-employee relationship. 

Common components of conditions of employment include:

Conditions of employment have stipulations that are job-specific and often negotiable, as well as requirements that apply to all employees within the organization. Some typical components of conditions of employment include the following:

  • Compensation. The hourly wage, salary, or commission the employee will receive for their work.
  • Working hours. The hours per day or week the employee will work, including provisions for overtime or flexible working arrangements.
  • Benefits. Benefits the employer will provide the employee, such as health insurance, retirement contributions, paid time off, and other perks.
  • Job description and duties. A clear outline of the employee's role, responsibilities, and expectations.
  • Probationary period. Some employers may require an introductory or probationary period to assess the employee's performance before confirming a permanent employment agreement.
  • Termination conditions. The terms under which the employer or the employee can end the employment, including notice periods or severance packages.
  • Company policies. Any specific rules or guidelines, including expectations regarding employee behavior and workplace policies. 
  • Workplace conditions. Information about the physical work environment, safety protocols, and job conditions.
  • Training and development. Guidelines for onboarding, training programs, and opportunities for professional growth to support the employee's skill development.
  • Confidentiality and non-disclosure agreements. Requirements for not disclosing specific company information to external parties.
  • Non-compete clauses: Restrictions on the employee's ability to work for a competing organization for a specified period after leaving the current employer.

Where are conditions of employment found?

Employers generally write out the conditions of employment in an employee’s employment agreement. The employer may also provide the conditions of employment in the job description, employee handbooks, and company policy manual.

Employers must ensure that conditions of employment are written down and available to every employee to provide clarity and consistency and reduce potential liabilities or legal issues. 

Who decides the conditions of employment?

Several factors determine conditions of employment, including:

  • Labor laws. Local and national employment laws and regulations influence the formulation of conditions of employment; however, these requirements may vary significantly by jurisdiction.
  • Collective bargaining. In some industries or countries, unions also negotiate specific terms within their conditions of employment on behalf of their members. These collective bargaining agreements may impact an employee’s conditions of employment. 
  • Employers. Employers may also decide certain conditions of employment, such as global employee benefits and competitive compensation, to attract and retain top talent in the global market. 
  • Employees. When reviewing their conditions of employment, a prospective hire may negotiate specific terms with the employer, such as flexible work hours or higher compensation. 

Can the conditions of employment change?

Conditions of employment within a written employee contract remain binding on both parties, and the employer and employee must honor the terms for the duration of the contract.

However, the employer or employee can modify the conditions if both parties agree to renegotiate and the changes comply with all applicable labor laws. Examples of potential changes to employment conditions include a salary increase or adding paid maternity leave.

Compliance considerations when determining conditions of employment

Most countries set laws for standard conditions of employment. Regulations vary from country to country, so employers must comply with all local labor laws and regulations regarding employee entitlements and rights, such as benefits, healthcare access, overtime, minimum wage, worker safety, and non-discrimination policies.

For example, U.S. labor laws do not require employers to provide paid maternity leave to their employees. In contrast, statutory German employee benefits mandate that employees who give birth receive six weeks of paid maternity leave.

Additionally, the U.S. practices at-will employment, in which the employer or employee can legally terminate the agreement at any time for any reason. However, most other countries do not allow at-will employment and require specific policies regarding termination, such as notice periods or payment-in-lieu of notice.  

Employers hiring talent in foreign markets must practice due diligence to understand the differences that may impact their employees and follow all applicable employment laws in their distributed workforce’s locations. Employers should outline these requirements in their conditions of employment to ensure compliance and understanding from both parties.

Learn more: How to Stay Compliant When Hiring Internationally

What happens if there’s a breach in the conditions of employment?

A breach in the conditions of employment can lead to severe consequences for either employer or employee, depending on the severity of the violation. The employer and employee should resolve minor disputes through clear communication and problem-solving.

If an employee significantly breaks workplace rules outlined in the conditions of employment, they may face disciplinary action or termination of their employment contract. If an employer violates the conditions of employment, they may face fines or a potential lawsuit.

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