Save Big on Taxes with Expert Assisted ITR Filing from ₹799!

Got an ITR notice? Talk to our CA for the right response.
Employment Agreement

Why You Need An Employment Contract

Explore the essential reasons for having an Employment Contract in this blog. From legal protection to defining expectations, understand why a well-crafted contract is crucial for both employers and employees.


A Employment contract is a documented agreement signed between an employer and an employee during the hiring process. This legal document outlines the specific details of the job and sets expectations for the employee. It serves to protect the employer by defining the employee’s conduct in the workplace and encompasses all the terms and conditions governing the employment relationship. 

Despite being occasionally overlooked by startups, having a written employment contract is beneficial for both employers and employees, providing clarity and structure to the professional relationship. Employers should be mindful of various factors when considering the initiation of an employment contract, ensuring comprehensive coverage of the professional engagement between the employer and the employee.

Latest Update 

The government has recently implemented two laws, with a focus on safeguarding the rights of employees.  Namely, the Code on Industrial Relations and the Code on Social Security. Here’s everything you need to know:

  • The Code on Industrial Relations aims to consolidate and modify laws pertaining to employment conditions in industrial establishments. 
  • The Code on Social Security, 2020 is designed to extend social security coverage to all employees and workers, both in the organized and unorganized sectors.

What is an Employee Contract?

An employee contract agreement which is entered into between an employee and an employer at the time of recruitment. In this agreement, parties clearly outline the specific nature of the business relationship as well as the compensation that the employee is to receive.

What is Included in the Employee Contract?

The employee contract should provide a clear delineation of the job’s parameters, outlining the employee’s responsibilities and what can be expected from the employer in terms of working conditions and benefits. Additionally, various other terms can be included in the contract, and it is crucial to thoroughly review it before signing. Some of the elements that can be incorporated into the employee contract are:

  1. The duration of the employment, if applicable.
  2. A detailed description of the employee’s responsibilities and job nature.
  3. Policies regarding sick leave and vacations.
  4. Benefits, including life, health, or disability insurance, and retirement accounts.
  5. Termination grounds and reasons.
  6. Non-compete agreements in case of termination or departure from the company.
  7. Non-disclosure agreements concerning the company’s trade secrets or client lists.
  8. Ownership agreements stipulating that the materials created by the employee during employment are company-owned.
  9. Assignment clauses indicating that patents developed by the employee during employment are to be assigned to the company.
  10. Dispute resolution mechanisms related to employment issues.

Benefits of an Employee Contract to Employees

An employment contract is advantageous for employees as it encompasses disability, life, and health insurance, along with details about the retirement account. It clearly outlines the employee’s responsibilities and job nature, specifying sick days, annual leave entitlements, termination reasons, and more. 

The contract also establishes annual income and pay rates, as well as parameters for working periods and hours. Ultimately, the employment contract fosters a harmonious working relationship, contributing to the satisfaction of both parties.


We trust that the information provided has been valuable in aiding your decision-making process. Should you require further assistance, please don’t hesitate to reach out to our team or share your thoughts in the comments section below. We highly value your suggestions and feedback, and we look forward to hearing from you.

Read More:-


Subscribe to our newsletter blogs

Back to top button


Remove Adblocker Extension