Only 16% of Employees Read Their Employment Contracts Entirely Before Signing

Employees usually sign employment contracts when joining a new company. Understanding a contract is crucial as it provides several benefits, and breaching it can have serious consequences. Legal Templates recently conducted a study to understand how many people actually read their contracts before signing them, how many have rejected an offer after reading them, and more. Check out the findings here.

Most employees sign an employment contract when they join a new organization. An employment contract is a legally binding agreement between the company and the employee. It provides benefits both to the employee and the organization. It also protects the employee from wrongful termination or if the organization breaches the contract. Many terms are usually standard across organizations, but there are specific changes.

But how many employees read the contract carefully before signing it? What are some of the most desirable benefits for an employee in a contract? And how many candidates have rejected an offer after reading an employment contract?

Legal Templates recently conducted a studyOpens a new window to find the answers to these questions and gain insights from employees’ experiences with an employment contract. A notable finding was that less than 20% of employees read an employment contract completely before signing it.

Here are the findings in detail.

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Only a Few Employees Read Through Their Contract

A significant percentage of an employment contract is standard. What changes depends on the role, industry, job description, how it is structured, and a few other factors. For example, a job contract of a full-time employee may look different from that of a freelancer. In any case, employment contracts have valuable information about employment terms. Hence, employees and contractors should know what they are signing up for.

So, what percentage of people actually go through their employment contract before signing? The study found that only about 16% of the respondents read the contract in its entirety, and about 2% did not read the contract. This low percentage of people reading their employment contracts was despite 95% of employees saying they took a contract seriously.Â

Of those who did not read their job contracts thoroughly, 85% were freelancers, and 75% were fixed-term workers. About 74% of executives did not read employment contracts completely, while 17% of full-time employees did not read their contracts in their entirety.Â

Percentage who haven’t read their contractsÂ

Source: 2022 Legal Templates SurveyOpens a new window

How many people rejected a job offer once they read a contract? About 63% did so, with 80% of Gen Z rejecting an offer once they read their contracts.Â

Employees Have Different Priorities in Their Contracts

Different employees have different priorities. Depending on these priorities, some aspects of the contract are more important to them than others. Nonetheless, benefits are more likely an essential part of a contract, especially as more employees seek customized packages per their needs.

According to the study, here is a list of things most employees look for and some of the biggest red and green flags for employees.

What terms in a contract are most important to people?

Source: 2022 Legal Templates SurveyOpens a new window

For 66% of employees, the wages/compensation component was crucial, and for 62%, the responsibilities they took on were important. Further, baby boomers, Gen X, and Millennials viewed compensation as the most critical factor in their contracts. Job responsibilities were more important for Gen Z employees. The work schedule was another crucial factor for 54% of respondents.

Regarding green flags, 63% cited benefits, while 61% cited salary transparency. About 46% said growth transparency was a green flag, while holiday pay was a green flag for 45%. There are also several flags to watch out for. For 59%, high pressure and little time to review and sign the contract was red flag. For 44%, a one-way indemnity clause was a red flag. About 36% said indefinite or broad non-compete clauses were a red flag, and 30% said unreasonable restrictive clauses were a red flag.Â

When employees understand their employment contract, they can negotiate certain aspects of it. For example, 49% successfully negotiated flexible hours, and 45% successfully did so for remote work. About 35% negotiated a signing bonus, while 31% successfully negotiated health and wellness benefits.

Most Gen Z Employees Have Breached Their Contracts

A breach of a contract can have serious consequences for either of the parties involved. Such situations may occur for several reasons, such as violating a non-disparagement or non-compete clause. When either the employee or company breaches a contract, they can be sued.

So, did any of the respondents experience a contract breach, workplace discrimination, or wrongful termination? About 56% of baby boomers breached their contracts, while 50% of Millennials did so. However, an overwhelming 80% of Gen Z breached their contracts. Further, among these Gen Z employees who breached their contract, 94% said it was intentional.Â

Besides breaching their contracts, many also had their contracts rewritten. The top reason was that the employer was required to change workplace policies (52%). This was followed by holiday/sick pay that was negotiated/offered but was not granted (49%) and reimbursement of travel/work-related expenses (41%).Â

Many people also faced wrongful termination due to several reasons, such as racial discrimination (38%), sexual harassment (38%), retaliation over compensation claims (33%), and wage and hour violations (25%). People faced wrongful termination also due to disability (24%) and gender discrimination (18%).

Some contract breaches invite legal action. About 55% said they sought an attorney because of a breach of their job contract. Fortunately, 96% won their case.

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Read It Before You Sign It

While an employment contract can protect you from wrongful termination, it can also cost you huge amounts of money if you breach it. And fighting a lawsuit may cost you an average of $550 in legal charges, according to the study. Hence, it is necessary to read your contract thoroughly before signing it. Further, reading it thoroughly may help you renegotiate your contract. It can also help you spot the green and red flags. Hence, read your contract in its entirety to understand what you are getting yourself into.

Do you read your employment contract fully before signing it? What green and red flags do you see? Let us know on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window .