Employment Contracts for Your First Startup Hires: What to Include

Your first employment contracts set the template for everything that follows. Mistakes made early — missing IP assignment clauses, unenforceable non-competes, equity provisions that create confusion — are expensive to fix once someone is already employed and even more expensive to fix after they've left. Getting them right from the start is straightforward if you know what to include.

The Legal Baseline: What the Law Requires

Employment law in Europe is more employee-protective than in the US. Both the Netherlands and UK have statutory minimums that apply regardless of what your contract says. Understanding these minimums helps you build a contract that's legally sound rather than just hope the template you found is accurate.

Netherlands (Arbeidsovereenkomst)

Dutch law requires the following to be in writing or confirmed in writing to the employee:

• Names and addresses of employer and employee
• Place of work
• Job title or description
• Date employment starts (and end date if fixed-term)
• Salary and how it's calculated
• Working hours
• Notice period
• Collective agreement (CAO), if applicable
• Holiday entitlement (statutory minimum: 4x weekly working hours per year)
• Reference to applicable pension scheme

Beyond these, several legally significant provisions require explicit inclusion:

Probation (proeftijd): For contracts longer than 6 months, maximum 1-month probation. For contracts of 2+ years or indefinite duration, maximum 2-month probation. Must be agreed in writing — no written provision means no probation period.

Non-compete (concurrentiebeding): Must be in writing to be valid. For definite-term (fixed-duration) contracts, the employer must include a written explanation of why the non-compete is necessary (compelling business interest) — without this, the clause is void. Non-competes must be proportional in scope, duration, and geography. Dutch courts regularly reduce or void overly broad non-competes.

United Kingdom (Employment Contract)

In the UK, a "written statement of particulars" must be provided on day one (as of 2020). Required contents include:

• Names of employer and employee
• Start date
• Job title and description
• Salary, pay frequency, and how it's calculated
• Working hours and days
• Holiday entitlement (statutory minimum: 28 days including bank holidays for full-time)
• Notice period
• Whether employment is permanent or fixed-term

UK employment law is somewhat less prescriptive about contract terms than Dutch law, but common practice for startups includes explicit provisions on IP ownership, confidentiality, and equity.

IP Assignment: The Most Important Clause

This is the single most important provision in your employment contracts and the most commonly neglected.

In the Netherlands, employer ownership of employee-created IP during working hours is governed by the Dutch Patent Act (Article 12) for inventions, and by general employment principles for copyrighted works. The rules are nuanced: work created "in the course of employment" typically belongs to the employer, but the boundaries are unclear for work done outside working hours or with personal tools.

An explicit IP assignment clause removes ambiguity. It should state clearly:

• Any inventions, software, designs, or other IP created in connection with the company's business belongs to the company
• This includes work done outside working hours if it relates to the company's actual or prospective activities
• The employee agrees to execute any further documents needed to record the company's ownership

In the UK, copyright in work created by employees in the course of employment automatically vests in the employer. But the scope of "course of employment" is interpreted narrowly in some cases. Again, an explicit clause is cleaner.

Critical point: IP assignment clauses typically cannot compel employees to assign IP created on personal time with personal equipment with no connection to the employer's business. Dutch law specifically protects this. Overreaching provisions (trying to own everything the employee ever creates) may be void and can create adversarial dynamics. Write clauses that are broad but defensible, not absolute.

Non-Compete and Non-Solicitation

Non-compete clauses in Europe are much harder to enforce than in the US. Courts in both the Netherlands and UK will scrutinize them for proportionality.

Netherlands: Dutch courts regularly reduce the scope, duration, or geographic reach of non-competes that are overbroad. Clauses that prohibit all work in a vaguely defined "sector" for 2 years across the EU are unlikely to survive challenge. Clauses that prohibit working for specifically named competitors for 12 months in a specific market segment are more defensible.

For indefinite-term contracts, non-competes are generally enforceable if proportional. For definite-term contracts, you must include a specific written justification — this changed under the 2015 Wet arbeidsmarkt in balans (WAB) reforms.

Compensation for non-compete enforcement (a requirement in some EU countries, not yet in the Netherlands) may become legally required under upcoming EU directives. Check the current state of the law when drafting.

UK: UK courts apply a "reasonableness" test to non-competes. They look at: geographic scope, duration, the breadth of activities prohibited, and whether the employer has a legitimate business interest to protect. Typically:

• Duration: 3–12 months is defensible for senior employees; 6 months is common for engineers
• Geographic scope: tied to where the employee actually had competitive impact
• Scope: limited to genuinely competing activities, not all employment in the industry

Non-solicitation clauses (prohibiting the employee from recruiting your other employees or soliciting your customers after leaving) are generally more enforceable than non-competes because they're narrower in scope. Include both, but rely on the non-solicitation as your primary protection.

Probation Periods

In the Netherlands, probation is capped (as above) and either party can terminate without notice during probation. But Dutch law prohibits dismissal for discriminatory reasons even during probation, which means termination during probation should still be documented and defensible.

In the UK, there's no statutory limit on probation period, but 3–6 months is standard. Dismissal during probation is simpler than dismissal after probation, but employment rights attach from day one for discrimination and some other claims.

Handling Equity in the Contract

The employment contract is not where you detail the full equity grant terms. The detailed terms (number of options, strike price, vesting schedule, exercise window) belong in a separate equity grant letter or option agreement governed by your option plan rules.

What the employment contract should include:

• A statement that the employee is eligible to participate in the company's option plan (if they are)
• A cross-reference to the plan rules
• Confirmation that equity vesting ceases upon termination (good leaver/bad leaver provisions should be in the equity documents, not the employment contract)

Do not include specific option numbers, vesting schedules, or strike prices in the employment contract — these change round by round and tying them contractually to the employment creates inflexibility.

Make sure there's a clause specifying what happens to unvested equity if the employee leaves — this should mirror what's in your option plan. Inconsistency between the employment contract and the option plan creates confusion and potential legal risk.

Common Mistakes

Using a consumer template. Templates found via Google are often based on English law without specification, out of date, or designed for a different country entirely. The €500 you save using a free template can become €5,000–€20,000 in legal fees when you need to enforce a provision that's void.

Not including a confidentiality clause. Employees have implied confidentiality duties, but an explicit clause that defines what's confidential and what obligations survive termination is important for protecting your competitive information.

Having contractors start work without any agreement. Freelancers working without a signed contract own the IP they create. This seems obvious but happens constantly in fast-moving early-stage teams. Founders making their first key hires often benefit from working through the legal and structural questions with advisors who have built teams before — a structured platform like Founderboard can surface the considerations you haven't thought of before you sign something you'll regret.

Omitting a social media / public communications policy. It sounds minor but becomes important when an employee tweets something problematic about a competitor, a customer, or the company itself. A brief acceptable use clause is worth including.