What is considered consideration?

[Serena Traa]

#91738

Hello,
We are looking at updating some employment contracts and I am trying to determine whether a specific situation might serve as consideration. An employee has asked to decrease their hours and work 3 days/week (instead of 4) for the summer. They will receive a reduction in pay. They would go back to the 4 days a week after the summer (2 months). I do not feel this is valid consideration to have them sign a new contract. I see it more like an accommodation (although not specifically linked to human rights). If the employee was going down to 3 days indefinitely, could this be considered consideration since we are giving something they want?
Please advise, and also if there is anything I am missing here or should take in to consideration (no pun intended).

[Rick Tobin]

#91776

Yes, this change in hours should necessitate a new employment contract or at the very least an amendment to an existing one. A general rule of thumb is any change in title, compensation linked to responsibilities, and changes in working hours should be written and signed off.

Consideration in the context of employment contracts refers to something of value that each party exchanges as part of the agreement. In traditional contract law, consideration is necessary for a contract to be legally enforceable. However, in the realm of employment contracts, consideration typically involves more than just monetary exchange.

Here are some common forms of consideration in employment contracts:

Salary/Wages: This is the most common form of consideration in an employment contract. The employer agrees to pay the employee a certain amount of money in exchange for their services.

Benefits: Employers may offer benefits such as health insurance, retirement plans, stock options, or other perks as part of the consideration for the employee’s services.

Job Security: The promise of job security or a certain duration of employment can be considered as part of the consideration. This could be in the form of a guaranteed term of employment or provisions for severance pay in case of termination without cause.

Training and Development: Some contracts may include provisions for the employer to provide training or professional development opportunities to enhance the employee’s skills and knowledge. This can be considered as part of the consideration provided by the employer.

Non-compete Agreements: In some cases, employers may require employees to sign non-compete agreements, which restrict them from working for competitors for a certain period after leaving the company. This restriction is often considered part of the consideration provided by the employer.

Confidentiality Agreements: Similarly, agreements to maintain confidentiality regarding company information or trade secrets may be considered part of the consideration in the employment contract.

In summary, consideration in employment contracts encompasses various forms of value exchanged between the employer and the employee beyond just monetary compensation. It reflects the mutual promises and obligations that form the basis of the employment relationship.

HR Insider Staff

[Author]

Posts