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Employment Agreement

While hiring any employee or contractor, whether for partime or full-time, an employment contract is required.

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How does Employment agreement work?

A definite, well-devised clause in an employment pact will keep things on the right path
and steer clear from uncertainty and also minimise legal liabilities.

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What is an employment agreement?

An employment agreement is an all-inclusive record on paper that discourses all clauses that govern the employment, as well as the rights, obligation, and responsibilities of the parties involved, concerning one other. When hiring, an employment agreement contract becomes a mandate irrespective of whether the hiring is full time or part-time. Some of the probable points of an employment agreement letter comprise of salary break-up, joining date, notice period, and non-compete clause.

Important Terms of an Employment Contract

terms of an employment contract
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What are the benefits of an employment agreement?

Certain benefits of an employment agreement contract are mentioned below-

Minimal Liability

Employment agreements shield the rights of the staff as well as the recruiters. A definite, well-devised clause in an employment agreement format will keep things on the right path and steer clear from uncertainty. A well-drafted employment agreement sample also minimizes future legal liabilities.

Gives Assurance

Any legal agreement keeps both parties at peace and so does an employment agreement. Once the staff and the employer sign the contract, it develops a feeling of mutual respect. The contract also sets the responsibilities and obligation for the involved parties, making sure that both the parties are treated fairly

What should an employment agreement include?(checklist)

A valid employment agreement contract should include the following key provisions-

The Parties

The parties between whom the agreement will be executed (the employee and the employer) should be stated clearly. The details of both the parties (names, addresses, etc) should be mentioned.

Job designation & profile

The job designation and profile for which the employee is hired should be mentioned in the employment agreement. It will also include the duties and responsibilities for which the employee will be held accountable.

Remunerations and reimbursements

The remuneration to be received by the employee, instead of his services, should be mentioned clearly in the agreement. It will include the breakup of the salary components such as the basic salary, health benefits, travel expenses, PF contribution, etc due to him.

The agreement should also mention the reimbursement due to the employee for any expenses made while fulfilling his duties.

Leaves and other benefits

The agreement must include a clause to specify the number of paid leaves the employee is entitled to during any given year and also how he can claim these. Other benefits the employee is due to receive (incentives, bonus, appraisals, etc) should also be mentioned in clear terms.

Confidentiality and non-disclosure

If the responsibilities and the duties of the employee put him in such a position where he comes to be aware of certain confidential information and/or trade secrets, the employment agreement needs to have an appropriate confidentiality & non-disclosure clause.

Termination of employment

The employment agreement should mention the process in which the employee or the employer can terminate the agreement. The terms and grounds on which the employee can be terminated should be mentioned clearly in the contract. Employee termination comes under the purview of several employment laws in India. Therefore, we would recommend you to consult a service lawyer while including this clause in the employment contract.

Dispute resolution

The agreement must mention the remedial measures the parties will resort to, to resolve disputes, if any. It will include alternative forms of dispute resolution they may choose to employ, such as arbitration.

General terms & conditions

These may include the obligations and rights of the employee and the employer, penalty conditions, and other important provisions applicable to both the parties.

Employment Agreement - Clauses

  • Variable salary component: This portion is dependent on the company earning enough profits during the year, and its willingness to pay a bonus to employees.
  • Notice period: It is the defined time period that one must serve from the date of submitting the resignation letter, till the date of being relieved from the company.
  • Terms of employment: Most companies do not allow their employees to carry out any other profession or business parallel to their employment.
  • Non-compete clause: It legally prevents employees from offering their services, for a given period, to other employers working in the same industry or segment (competitors).
  • Transfers & promotion policy: Details on the frequency of transfers within the company, and the basis of being promoted.
  • Probation period: This is the time that the company takes to form an opinion about the employee, work ethic, commitment & willingness towards the job, etc.
  • Additional allowance: House rent, travel, medical reimbursements, insurance cover, and other allowances are part of most standard employment contracts.
Employment Agreement Clauses

What is the process of preparing an employment agreement at Vakilsearch?

3 Business Days

Upon contact, your request to write an employment agreement contract will be received and our representative will be in touch with you to take your request forward. If we need more information from your end, we will call you as and when required. After we receive all your details, our in-house lawyers and legal experts, will create the employment agreement sample and send it across for your view within 2- 4 business days.

2 Business Days

Your original price includes two rounds of iterations. Therefore, if you need any changes done to the employment agreement format, our lawyers will do the needful and send it across to you for your view once again.

FAQs on Employment Agreement

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