What is an employment contract?

An employment contract is an agreement between an employer and an employee at the commencement of employment, stating the exact nature of their business relationship, and what compensation the employee will receive in exchange for specific work performed. An employment contract often defines fringe benefits, pension plans, holiday pay, vacation package, and severance packages, as well. Employment contracts are not always “contracts”; employee handbooks often constitute employment contracts, and both the employee and employer must abide by those terms. Oral promises, in many instances, may also be considered an employment contract. Whether a written contract, part of the handbook, or an oral promise, violations of the terms of the contract can be considered a breach of contract.