The alternative is having formal employment contracts. I work for the employer for a fixed term. If I choose to leave before that term is up, I have to pay a pe

The alternative is having formal employment contracts. I work for the employer for a fixed term. If I choose to leave before that term is up, I have to pay a penalty to the employer. If the employer chooses to fire me they have to pay me a penalty. The exact amount conditions of the penalty are specified in the buy-out clause of the contract. This is universally how people with actual leverage (i.e. high performing athletes, Fortune 500 C-level execs, etc) get paid.