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Employment Agreement

What Are The Requirements For A Valid Employee Agreement?

One should be very sure of the employee agreement, before preparing and signing it, and here you can get all the details.

Requirements For A Valid Employee Agreement: An employee agreement is the only legal document between the employee and the employer. It lays out both parties’ duties, rights and obligations during the employment term. An employment agreement plays a crucial role, and it’s an important document that helps manage employees because it lays down the rights and obligations of the employer and the employee. Everyone is an employee, from the junior to the most senior level individual and to manage the employees efficiently, employee agreement plays a crucial role.

Employee agreement has different elements, some of which are mentioned here:

  • Job description of the employee
  • Employment term
  • Benefits of the employee
  • Compensation to the employee
  • Leave policy
  • Termination ground
  • Protection of confidential information
  • Dispute resolution explains governing laws on jurisdiction

All the provisions are deemed to be relevant to the employer. In the case of individuals hired on the contract basis for a limited-term like candidates hired for specific projects service agreement is drafted in place of the employment agreement. An employment agreement lays down the rights and obligations of the employer and the employee. It clarifies employees’ bonus pay scale and leaves out working awards, job description and other things.

Employment Agreement Clauses:

The Essential Clauses in an Employment Agreement Are as Follows:

The essential terms and clauses which must be included in the agreement are mentioned here. An employer can come up with different terms and conditions to safeguard the employer’s interests.


It should include both the employer and employee, who must sign the document.

Effective Date

The effective date is the date from which the agreement will come into force; in this case, the employee’s joining date should be considered the effective date.

Work Location

The place where the employee shall be operational must be mentioned in the agreement.

Work timings

The agreement must state the work timings and the working hours.

Job Description

The agreement should mention the employee’s primary responsibility and include the job description stated in the offer letter delivered to the employee. The details of the agreement where the employee needs to be working, and details regarding the trainer or reporting head should be mentioned.

Probationary Timeline

A probationary timeline must be agreed upon at the beginning of the employment. The timeline for probation should not be more than six months. The probationary term should not exceed half of the employment contract duration in the case of fixed-term employment. Employees are paid standard remuneration under the probationary term.

Leave policy

Leave policy needs to include the details regarding the public holidays and paid leaves. The employees entitled to leave for a year are mentioned in the leave policy.

Notice term

Notice terms need to be provided by the employer or the employee. The party should not be allowed to terminate the agreement, upgrade in case of any immediate termination except the breach of an agreement or reasonable terms. The non-terminating party must be entitled to compensation.


The agreement should specify the gross salary which is offered to the employee. Any reduction made to the salary like tax or insurance should be specified in the contract. Method of payment of remuneration should be agreed upon by both parties mutually.


All the agreements need to have a term, especially in the case of employment for staff employers need to keep the fixed term for the employees. It is for a year generally in significant cases, but it is all subject to renewal.


Ambiguity in case of dispute arising out of employment agreement or employment in general parties must specify whether to go for the arbitration first or not to avoid ambiguity in case of any disputes. There has to be some concept of both the parties mutually to reach an amicable settlement which can be possible by having a well-structured case for arbitration.


The parties to the contract might specify the judicial court or forum, which will have the right to resolve the legal dispute by including the jurisdiction clause between the employer and employee related to the employment agreement. Governing law clause in the employment agreement generally sets out the choice of law of the parties to the contract. Laws relating to employment are likely to vary from one state to another, so it is advisable to state the set of governing pauses mentioned in the contract.


The employer wants sensitive data, including trade secrets or financial information, to be public or among the competitors. It is essential to have a non-disclosure and confidentiality agreement in place to bind the employee from disclosing any personal information. A separate non-disclosure agreement can be executed in the case of senior or employees exposed to confidential data of the company.

Intellectual property rights

Organisations need to put a lot of effort into training the employees, providing several outputs in crucial business information. The data is the company’s intellectual property and should not be misused by the employees. To prevent misuse, the agreement needs to feature a clause stating that intellectual property is created at the employer’s premises using the employer’s infrastructure, which shall belong to the employer.

Non compete clause

The clause will restrict the employee from opening a similar business or joining another company with a similar business as an employer for the time stated within the clause.An employment agreement has not been mentioned in the Indian contract act. It is legally valid in India, but it is not imposing any restrictions on the employee. It is not an absolute restriction and only applies to some restrictions. The employer has an exclusive right to the employee’s services during employment. These elements are mandatory for a valid employment agreement. You can check the terms before signing one! Employee agreement India should have the terms and conditions mentioned here, so it is always just to be updated.


Let there be no loop hole in your employment agreement. Make sure to be ultra-sure of the same, and now you can reach out to experts at Vakilsearch to help you out.

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