Employment Contract Basics Startups Often Miss

The most frequent problem

• No written employment contract: work starts on a verbal agreement alone

• The probation misconception: probation does not mean you can dismiss someone freely

• Abuse of inclusive wage contracts: if it does not match actual hours worked, it becomes a problem later

• Freelance contract form: if the substance is employment, the person counts as an employee regardless of the contract title

• Confusing stock options with salary: grant and exercise conditions never put in writing

In investment and M&A due diligence, labor and HR compliance is almost always a check item. Cleaning it up early costs far less than cleaning it up later.

Documents to have in place early on

• Written employment contract

• Rules of employment (10+ regular employees)

• Stock option grant agreements and board and shareholder meeting minutes

• Confidentiality and IP ownership clauses