How to read an employment contract
A plain-English walkthrough of an employment contract: pay, probation, notice, restrictive covenants, IP, and the clauses worth negotiating before you sign.
The short answer
An employment contract sets out your pay, hours, duties, notice periods and what you may do after you leave. Most of it is standard; the parts worth reading slowly are probation and notice, any bonus or commission wording, intellectual property, and post-employment restrictions. Almost everything is negotiable before you sign and almost nothing is after.
Start with pay — including the parts that are not salary
Base salary is easy. The conditional money is where the disputes are: bonus, commission, equity. Check whether a bonus is discretionary (the employer can pay nothing) or formula-based, whether you must be employed on the payment date to receive it, and what happens if you resign or are made redundant first.
For equity, the contract rarely contains the detail — ask for the option plan itself and check the vesting schedule, cliff, exercise window after leaving, and whether leaving triggers a buy-back.
Probation and notice
Probation usually comes with a short notice period on both sides. Check the length, whether it can be extended unilaterally, and what benefits are suspended during it.
After probation, look at whether notice is symmetrical. An employer requiring three months from you while giving one is common and is a fair thing to ask to equalise. Also check for garden leave and payment in lieu of notice.
Duties, hours and flexibility clauses
Look for 'and such other duties as the Company may reasonably require', mobility clauses that let the employer change your location, and variation clauses allowing changes to terms. These are normal but set the outer edge of what can be asked of you without a new contract.
If remote or hybrid working matters to you, get it written into the contract rather than relying on a policy the employer can change.
Intellectual property and moral rights
Most contracts assign to the employer anything you create in the course of employment. Wide versions capture anything created during the employment period, including side projects on your own time and equipment.
If you have an existing project or intend to build one, list it as an excluded prior invention in a schedule before you sign.
Restrictive covenants after you leave
Non-compete, non-solicit of clients, non-solicit of colleagues, and confidentiality. Enforceability varies enormously by country and by state, and some places ban employee non-competes outright, but the practical effect is real: a restriction in your contract can cost you a job offer even if a court might strike it down.
Check duration, geography and how widely 'competing business' is defined. Six to twelve months, limited to genuine competitors and clients you actually dealt with, is the defensible shape.
Sample clause language
Illustrative wording, written for this guide — not copied from any real contract.
For a period of twenty-four months following termination for any reason, the Employee shall not, anywhere in the world, be engaged or interested in any business which competes with any business carried on by the Company or any group company.
Worldwide, two years, every group company, any competing business — far wider than needed to protect a legitimate interest, and unenforceable in many places.
For six months after termination, the Employee shall not solicit business from any client of the Company with whom the Employee had material dealings during the final twelve months of employment.
Short, targeted at actual client relationships, and limited to solicitation rather than all employment.
Red flags to look for
- Bonus described as discretionary with a requirement to be employed on payment date.
- IP assignment covering anything created during the employment period, on or off the job.
- Non-compete longer than twelve months or without geographic limits.
- Unilateral variation clause allowing the employer to change terms at will.
- Notice period much longer for you than for the employer.
What to ask for
- Ask for symmetrical notice periods.
- Get a formula, or at least stated criteria, for bonus and commission.
- List prior inventions and side projects as carve-outs from IP assignment.
- Narrow non-competes to real competitors, a real region and six to twelve months.
- Put remote working, title and reporting line in the contract, not just in an offer email.
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Frequently asked questions
Can I negotiate an employment contract?
Yes, and the window is between the offer and your signature. Employers expect questions on notice, IP carve-outs and restrictive covenants; asking does not usually put an offer at risk.
Are non-compete clauses enforceable?
It depends entirely on where you work. Some jurisdictions enforce reasonable, narrow restrictions; others refuse to enforce employee non-competes at all. Assume it will affect your next job search even where enforceability is doubtful.
Does my employer own what I build in my spare time?
Often yes, if the contract's IP clause is written broadly or your project relates to the employer's business. A written carve-out before you sign is the reliable fix.
What if the contract contradicts what I was told in the interview?
The signed contract normally wins, especially where it contains an entire agreement clause. Get any promise you are relying on written into the contract itself.
Related guides
This guide is general educational information about how these clauses usually work. It is not legal advice, and contract law differs by jurisdiction. For a decision that matters, speak to a qualified lawyer.