Contract management is just one of the many hats that modern HR departments wear on a daily basis. Contracts between employee and employer are of the utmost importance, which means proper management of these documents is essential to good business. There are many ways the contract management process can go wrong or be poorly optimized.
The consequences of poor contract management can ultimately be catastrophic for the company, the employee or both. With that said, below are some contract management strategies that all HR departments should bear in mind, especially as the labour market and workplace continue to change in large and often unpredictable ways.
Create a Centralized Location
Up until the advent of widespread contract lifecycle management, employee contracts were all stored in large filing cabinets. Whether in a filing cabinet or in the cloud, the principle is the same: HR departments need to keep all contracts in a centralized location for easy access. It makes the search process easier when contracts need to be referenced or amended, saves time and ensures that employees and managers alike know where to go.
Obviously, having so much sensitive data in a single centralized location requires good cybersecurity, including things like two-factor authentication, timed sessions, and other permissions and access controls, particularly while people are working remotely.
Make Signing Easy
Drafting a contract is almost always the easy part. Getting both parties to sign can take time, especially if the contract is not in a centralized location and if a new hard copy needs to be created each time there is a revision or dispute over benefits or contract terms. This is why it is so important to have e-signing capabilities as part of your contract management process.
It should be possible for both employees and the organization to have access to the same document at all times and for easy insertion of signatures from both parties in order to eliminate potential bottlenecks. In some cases, the inefficiencies in the signing process can give employees cold feet or make them believe that the organization is not being forthcoming with respect to the rights and duties of their contract.
Assess Performance Regularly
If your HR department hasn’t already mapped out KPIs for contract management and contract performance, it should start today. Commonly used performance indicators include metrics like contract length, relationship quality and employee satisfaction, how rigorously you adhere to milestones and deadlines, and how much it costs to maintain and update contracts.
Regular performance assessment also ensures that HR departments learn from past mistakes. Particularly important is the assessment of how the specific language used in a contract influences things like clarity, employee satisfaction and dispute resolution so that both the organization and employees understand what is expected of them.
Track Deadlines and Major Milestones
As a business grows, the number of employees it brings on, full-time, part-time or contract, will inevitably increase. Once this starts to happen, manually keeping track of employment and other contracts becomes much more of a hassle. Different employees brought on at different times will have different contracts, with different terms and contract deadlines–with respect to changes, end dates, etcetera–so good contract management dictates keeping on top of these differences at all times.
Deadlines and milestones can creep up, some of which demand specific actions from employers and employees. A good contract management system can make the life of an HR professional much easier with respect to monitoring and preparing for these dates and help avoid being blindsided, potentially with significant repercussions for the business and the employee.
Best Practices in Cyber Security
As was alluded to at the outset of this article, cybersecurity is a fundamental part of good contract management. The sheer amount of sensitive company and employee financial information that HR departments handle necessitates a commitment to security, and especially proper authentication and permissions.
This is all the more salient in our new era of remote work, where many HR professionals are likely accessing all of these documents from home and on networks that have not been vetted by the organization. Make sure HR teams are well-versed on the latest phishing techniques and keep their software and hardware constantly updated with new versions and security patches.
Regular Communication With Employees
HR departments can also help preempt potentially unpleasant conversations with employees by taking the time to explain changes, contract deadlines and triggering events before they take place and in ways that make sense to people. Bear in mind that not all employees will have the same understanding of things like contract and employment law, and the ways in which employers and employees are responsible for their actions and their duties to the other party. Avoiding legalese, especially in multicultural workforces with differing levels of language proficiency, is part of good contract management and culturally sensitive management more broadly.
Clearly Define Employee Responsibilities and Performance Indicators
The foundation of a good contract is clarity. Employees should be well aware of what constitutes adherence to the terms of their contract with respect to their performance. This is especially crucial when it comes time for performance evaluations.
You, as the HR department, and the organization more generally, want managers to be able to point to elements of the employment contract to say “here is where you are falling short of your duties and obligations to the company” to avoid frustration and misunderstanding. Conversely, you also want employees to be able to point to that same document in order to have that same discussion with the organization.
HR departments are responsible for people management and, by extension, contract management. When employees sign on with a company, their dealings with the organization as an entity happen almost exclusively with their HR department. Throughout an employee’s time at a company, from the moment they sign their contract, through renegotiation, through promotions, changes to company policy, etcetera, good contract management is essential to keeping people happy, satisfied with their jobs, and confident that fairness and transparency inform all contract and employment decisions.
HR departments, therefore, would do well to keep the above contract management considerations and recommendations in mind.