Employment

Employment contract for a CFO

Valentina GolubovicValentina Golubovic
Last updated on:
July 20, 2022
Published on:
May 12, 2022

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What is a CFO?

A Chief Financial Officer (CFO) manages all aspects of financial matters and decision making, ultimately responsible for the company's financial health. They are executive members influencing company strategy and overseeing all the financial operations of an organisation, including accounting, financial reporting, tax, business control and treasury.

Importance of having an employment contract for a CFO

An employment agreement allows an employer to hire an employee. An employment contract specifies the rights and obligations of the employer and the employee. An executive employment agreement for your CFO will specify key information such as the employee's role, salary, work location, hours and holidays.

It is crucial to have a CFO employment agreement as it can be used as evidence in court if there is a dispute between the parties. It also protects both parties by clearly understanding what each party expects from the other, including responsibilities and compensation. In addition, an employment contract can help clarify expectations and eliminate uncertainty about the role of the chief financial officer.

An employment agreement protects the company through restrictive covenants, especially in its early stages. Restrictive covenants include non-compete, non-soliciting, and non-poaching clauses to prevent employees from damaging the business by reducing competition.

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How to structure an employment contract for a CFO

Notice Period

One thing to consider for a senior employee such as a chief financial officer is a notice period. You wouldn't necessarily have the same notice period for a CFO as someone in a junior role, even though nothing is stopping you from doing this. A senior employee has more responsibility and will most likely be dealing with sensitive matters.

For example, suppose a CFO is in the process of arranging finance, helping conduct an audit or implementing a new strategy, and they suddenly give in their resignation letter with a month's notice. In that case, it could harm the company by not allowing sufficient time for a handover.

Benefits

A CFO employment contract should include salary, bonus, benefits, stock options and other perks. Such payments and benefits are essential in attracting and retaining hardworking employees. Compensation for a CFO may be slightly more attractive than for a junior employee due to increased challenges and responsibilities faced in the role.

Bonuses

Bonuses are an excellent way for companies to share profits with employees, particularly those who contribute significantly to the company's success. Bonuses are typically paid at year-end or some other predetermined date during the year.

Stock Options

Stock options are another great way for companies to reward and motivate employees. For startups, it's essential to motivate employees through stock options. If employees have this form of deferred compensation, it will give them a sense of cohesion and incentivise them to work hard. Stock options would be a great way to reward their efforts while allowing them to benefit from long-term growth in value.

Salary

The salary of a CFO is not only determined by their qualifications but also by the company's budget. A good CFO will have a good range of skills transferable to many businesses and industries, so it is vital to know what they are worth, their base rate and how much they can expect to earn in different roles.

Non-Compete Clause

For a startup, it may be necessary to include a restrictive covenant depending on the nature of your business and the duties of the CFO. This places constraints on the employee if they ever leave the company. This clause aims to protect the interests of the business. Such clauses are usually inserted to prevent staff from competing with their old employer or using confidential information after their employment has ended.

How can I create an employment contract with Legislate?

Legislate is an end-to-end contracting management software for the unlawyered. To find out more about creating your employment contracts on Legislate, take a look at our tutorial, or you can book a live demo to learn more about the platform.

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