What are terms of employment?

Terms of employment refer to the conditions that define the working relationship between an employer and an employee. These terms lay out the who, what, when, where, and how of the job—from compensation and benefits to job duties, schedules, and workplace policies.

For small business owners, clearly defining terms of employment helps prevent misunderstandings and sets expectations from day one. It’s a foundational part of onboarding, and when documented correctly, it helps protect both you and your team.

What do terms of employment include?

There’s no one-size-fits-all list, but here are the most common elements:

• Job title and responsibilities – What role the employee is filling and what’s expected of them
  
  
• Work schedule – Hours per week, shift times, and days required
  
  
• Compensation – Hourly rate or salary, overtime pay policies, and how often employees are paid
  
  
• Benefits – PTO, sick leave, health insurance, retirement plans, and any other perks offered
  
  
• Employment type – Full-time, part-time, temporary, or seasonal
  
  
• Work location – On-site, remote, or hybrid arrangements
  
  
• Start date and probationary period – When employment begins and any trial period details
  
  
• Termination policy – Whether the position is at-will, and the process for ending employment
  
  
• Workplace policies – Expectations around attendance, dress code, conduct, and safety
  
  

These terms can be part of a formal employment contract, an offer letter, or detailed in your employee handbook.

Why terms of employment matter

Setting clear terms protects your business and helps you:

• Avoid disputes about pay, hours, or responsibilities
  
  
• Provide consistency across team members
  
  
• Support legal compliance with wage and labor laws
  
  
• Improve employee trust by setting clear expectations
  
  

When everyone’s on the same page, it’s easier to build a strong team culture and manage performance fairly.

When to define the terms

The best time to define terms of employment is during the hiring process. These details should be shared before the employee’s first day and ideally outlined in writing.

You can include them in:

• Offer letters
  
  
• Employment agreements
  
  
• Onboarding paperwork
  
  
• Employee handbooks
  
  

Try Homebase Hiring & Onboarding to streamline how you share terms of employment, collect e-signatures, and get new hires set up properly.

Tips for setting clear terms of employment

• Be specific – Vague terms like “as needed” can cause confusion
  
  
• Stick to what's legal – Make sure all terms comply with local, state, and federal laws
  
  
• Keep it updated – As your policies or roles evolve, review and update the terms
  
  
• Be consistent – Apply terms fairly across employees in similar roles
  
  
• Review with new hires – Walk through the terms together during onboarding
  
  

The more clearly your terms are communicated, the smoother the working relationship will be.

How Homebase supports setting and managing employment terms

With Homebase, you can manage all your hiring and onboarding documents in one place. That means:

• Send offer letters and contracts digitally
  
  
• Create onboarding checklists that include key policies and acknowledgments
  
  
• Store signed documents for easy access
  
  
• Update employee records anytime there’s a change in job status, pay, or schedule
  
  

Whether you’re hiring part-time staff or building out a team of full-timers, Homebase helps you stay organized and compliant.

Sign up for Homebase to simplify hiring, manage your team’s terms of employment, and focus more on growing your business.

Related articles

• Employment Contracts: What Small Businesses Need To Know
• Protect Your Small Business: Employment Laws You Should Know
• Your employment application form: What you need to know?

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