The article discusses the changes in labor relations between the scientific and teaching staff and educational institutions of higher education concerning with the providing of an effective contract. Particular attention is paid to the definition of criteria for evaluating the effectiveness of the scientific and teaching staff. The author notes that the system of evaluating the effectiveness of scientific and teaching workers should be based on several groups of clear criteria, including the weight of every criterion in points or other units. Effective contract system should be based solely on the merits of the system, rather than penalties. Irrelevant or subjective criteria, such as the students’ ratings, fellow ratings volume of funds attracted to the university cannot be taken into consideration. We analyze the procedure for determining the remuneration in accordance with the effective contracts. With the introduction of effective contract the structure of rewards of academic staff remains the same and includes guarantied and stimulating parts, where the guarantied part of the remuneration is much smaller. “Stimulus” to comply the effective contract should be created through the indicators established in the relevant local acts of educational organizations of higher education.