Why Should Organizations Have Both Employment Contracts and Social Contracts?

The traditional workplace is changing. Many workers want more than just a wage-earning job. Many employees want their work to be meaningful. They want to know how they fit into a company in the larger sense. They want a more welcoming, positive, and engaging workplace culture.

That’s why having both employment contracts and social contracts is important. Employment contracts spell out exactly what employees must do and what employers expect, but social contracts can influence the culture of an organization. We break down the differences and benefits of each contract below.

What is an employment contract?

An employment contract is a legally binding agreement between an employer and an employee. A good employment contract lets both parties know where they stand, what is expected of each of them, and what each party is entitled to.

What employment contracts typically include

It depends on the employee and your business, but a typical employment contract might have:

  • The job title and description
  • A term of employment
  • Compensation and benefits
  • Sick day and vacation policies
  • Reasons and grounds for termination
  • Non-disclosure agreements or noncompete clauses
  • Policy for dispute resolution

Don’t forget: if you’re going to prepare an employment contract, it should be in writing! A handshake deal isn’t as clear and enforceable. Put it in writing for both you and your employee’s sake.

Why you need employment contracts

Employment contracts aren’t the most fun thing about starting a new job or adding someone new to the team. However, many employers need employment contracts in order to officially define and protect their employer-employee relationship.

Employment contracts aren’t necessary for every role; if you don’t have one for an employee, they’re likely working under an implied employment contract. That’s an unwritten contract based on common law, a verbal agreement, or unique circumstances.

So when should you prepare an employment contract and have your new employee sign it? Here are some of the top reasons.

  • When your employee is working with confidential information. You don’t want your trade secrets, client lists, or other sensitive information out in the open. You can add a non-disclosure clause into an employment contract to prevent that.
  • When you want to avoid competition. If an employee decides to leave and start their own similar company, you’ll want a noncompete clause in their employment contract.
  • When you want to keep the best employees. An employee with special skills and knowledge can be tough to replace if they suddenly leave. You can use the employment contract to define the reasons and notice period they need to consider before leaving.

There are clearly many advantages to using an employment contract, but remember that a contract is legally binding on your end, too. You’re responsible for acting in accordance with the contract’s terms. If your employee’s role changes, or if they aren’t a good fit for the company down the road, you’ll need to either stick it out, or think about renegotiating the contract.

What is a social contract?

Now that we’ve covered what an employment contract is, let’s talk about its counterpart: the social contract. While an employment contract covers the legal and technical aspects of a job, a social contract fills in the gaps.

In philosophy, a social contract theorizes how individuals behave within a group or society. Social contract theory states that how a person behaves depends upon an agreement with other individuals in society. That agreement might be officially written, such as federal or state laws, or unspoken, like accepted social customs.

The concept of social contracts fits within your workplace too, though you may not consider it that often. Think about the unspoken rules that everyone in your company seems to follow: the best times to schedule a meeting, cues that signal it’s okay to interrupt someone while they’re working, how many free snacks one person is allowed to take from the employee kitchen, and so on. Your workplace has its own accepted set of rules, unspoken or not.

How does a social contract work?

An employment contract writes out the typical responsibilities of one of your employees. Let’s say you have a graphic designer who, according to their employment contract, must work a specified number of hours per week and has to track the hours spent on each project. But that’s not all they have to do to be a good employee, right? A manager would want them to complete quality work that meets company standards. They’d expect their employee to come to work on time and in a good attitude.

On the flip side, that graphic designer expects to be paid fairly for doing their work. But they might also expect their manager to trust their skill and judgment and avoid micromanaging. Maybe they also expect to work with other graphic designers when needed. A social contract can lay out the unspecified but expected rules between employer and employee.

The benefits of having social contracts

We know that employment contracts can provide clarity and accountability for both employee and employer, especially in legal terms. If a social contract is less formal and technical, then why is it a good idea to use them?

For one thing, social contracts encourage both employers and employees to be better at their jobs. While an employment contract outlines how to do the bare minimum by meeting its requirements, a social contract can provide a more detailed framework for both parties. If an employee wants to move up the ladder from their current position, a social contract can give them purpose, direction, and passion. If a manager wants their team of employees to complete projects more efficiently, a social contract can give them guidance and accountability.

You need both contracts to run a successful organization

Social contracts can shape a company’s culture for the better by influencing the behavior of its employees and managers. And of course, employment contracts are necessary to protect both employer and employee should something go wrong. Use both types of contracts to build a stable, engaging organization that respects both the employees and the work they do.