What is an Employment Contract?
An Employment Contract or Employment Agreement is a legally binding employment document that lays down the stipulations relating to the performance of an employee’s duties during the course of his employment. This contract sets the terms and conditions of employment such as salary, benefits, working hours, duration of employment. It lays down all the rights and obligation of the employee in addition to employee, employer and employment details. The document lays down the designation given to the employee along with his rights, duties and responsibilities.
People also refer to an employment contract as Employment contract, Work Contract, Job Contract, Contract of Employment and Contract of Service
Benefits of an Employment Agreement
- Safeguards Interest of Employee
- A document that states the provisions relating to employment of a person creates a sense of trust between the hired individual and the company. It specifies remuneration, leaves, reimbursements and other benefits.
- Safeguard Interest of Employer
- An employment agreement not only limits the liability of the company but also cements the relationship between the employer and employee. It also states non-compete clauses, confidentiality and defines the roles and responsibilities of an employee.
- Conflict Resolution
- An employment agreement also acts as an important piece of evidence in case there is any conflict between the company and its employee. In case of a dispute, this document acts as a validation of the terms agreed by the employer and employee.
Requirements for a valid Employment Contract
- The employee and employer must sign the agreement by their own free will and with their consent.
- The conditions stated in the agreement must be reasonable.
- The conditions imposed on the employee should only be to safeguard the interests of the employer.
- The employer may contract this agreement on a stamp paper
Important Clauses in an Employment Agreement
- The Parties
- The agreement must state the names and details of the parties of the contract i.e. Employer and Employee.
- Designation and Job Description
- The employment agreement must clearly mention the designation of the employee and his/her job profile. It must include the responsibilities of the employee during the course of his employment.
- Remuneration and Reimbursements
- Leaves and other Benefits
- Additionally, the agreement must contain number of paid leaves an employee can take during a particular period of time. It must mention any other benefits such as bonus, incentives, appraisals, etc. that the employee would receive during the course of employment.
- Confidentiality
- The employer may include a provision to prevent the employee from using any confidential information, trade secrets or sensitive information of clients for his own benefit.
- Non-compete
- A non-compete agreement prohibits the employee from working for competing companies or competing with the employer if they leave, including misusing confidential information.
- Non-solicitation
- Employees should not recruit other co-workers to join them when they leave the company. Furthermore, the employee cannot ask the company’s clients or customers to follow them to their new company.
- Termination
- The employment agreement must state the manner in which the employer or employee can terminate the contract. It must also include a probation period if applicable.
- Law Applicable and Dispute Resolution
- The law which shall be applicable in case of any dispute, and the court which shall have jurisdiction over the matter must be mentioned. It must mention the measure that the employer and employee will use to resolve their disputes. This may include any form of Alternative Dispute Resolution.
FAQs
The agreement can be printed on a letter head of the company, on a plain paper or on a stamp paper. It is not necessary for an employment contracted to be on a stamp paper. It is legally binding even on a letter head.
A temporary contract is used for temporary employees. It still contains all of the relevant details of an employment agreement, but it specifies a specific period of time during which the agreement is valid.
Employment bonds are essentially employment agreements that contain a negative covenant and are legally enforceable. The agreement is enforceable if the parties agree to work according to it with their free consent.
Hey @HarshitShah
The things to include in an employee’s personnel file are: