What are the terms Included in Employment Contract?

Employment contract are employment agreements with negative covenant. Under the Indian Law, the employment contract with negative covenants is valid and legally enforceable if the parties agree with their free consent i.e. without fraud, coercion, undue influence, mistake and misrepresentation.

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Every business startup needs a number of employment contract and legal document ranging like job offer letter, appointment letter and non-disclosure agreement while starting a business. Investing the time and effort to draft well written legal documents at the beginning can save a lot of misunderstanding and liability in the future for the company. Therefore, it is important for Entrepreneurs to understand the basic legal framework and enter into employment contract using well drafted legal documents. Through this article, filing bazaar provides you some basic information related to the most common legal document and employment contract required for any business startup in India. The validity of this Employment agreement can be challenged on the basis of Section27 of the Indian Contract Act. Section 27 of the Indian Contract Act, 1872 prohibits any agreement in restraint of trade and profession. Any agreement in restraint of trade and profession according to Section 27 is invalid.

For an employment contract to be valid under Indian law, it has to be proved the freedom of trade. In the case where the employer is able to prove that the employee is joining the competitor to disclose the trade secret then the court may issue an injunction order restricting the employee from joining the competitor. If a contract is challenged on the grounds of violating the provision relating to restraint of trade, the onus is on the party supporting the contract to show that restraint is reasonably necessary to protect his interests.

Following are the requirements of a valid employment contract agreement.

1.     The agreement must be signed by the parties with free consent.

2.     The conditions stipulated must be reasonable and:

·         The conditions imposed on the employee must be proved to be necessary to safeguard the interest of the employer.

The employment bond is to be executed on a stamp paper of appropriate value in order to be valid and enforceable.

Whether you run a limited liability company or Sole proprietorship firm registration, you should have an employment contract. The details of LLC or Sole proprietorship firm registration employment contract vary considerably, depending on a number of factors, but generally include:

§  Tax considerations

§  Number of  employees

§  Structure of management

§  Member investments

§  Sharing of profits

If there are multiple employees, this agreement becomes a binding contract between the employees .For the security of the business or business needs a digital signature certificate

An employment contract lays out the rights and responsibilities of both employer and employee. More specifically an employment contract can include: 

• Salary or Income: Contracts will itemize the salary, Income, or commission that has been agreed upon.

        Hours of Work:- Term of employment contract deal with

·        Overtime (paid or not)

·        Shifts

·        Breaks

 Period of employment: An employment contract will specify the term of time employee decides to work for the company. A minimum duration is laid out, with the liability of extending that period.

General responsibilities: Contracts can list the various job role and tasks a worker will be expected to do it while employed.

Sick Pay

·         The sick pay clause will set out whether the employer operates a sick pay scheme or not. However, this entitlement may be implied from custom and practice in the workplace.

·         The employers may operate a sick pay scheme or an income continuance plan or health care insurance entitlements.

·         This needs to be clear from the outset in the employment contract as sick pay is an area which causes great difficulty for both employer and employee in the absence of clarity. 

Benefits: A contract should lay out all promised benefits, including, but not limited to, health insurance, 401k, vacation time, and any other perks that are part of the employment.

Communications: If an employee's role involves handling social media, websites or email, a contract might include a point that the company retains ownership and control over all communications.

       Other: - Other clauses which may be included, depending on the specific requirements of the employer, may include

     • Wearing of uniforms, dress code

     • Punctuality and attendance

     • Responsibility for tools, property, uniforms, clothing, etc

     • Requirement to hold a driving license

     • Compassionate leave

     • Parental leave (subject to statutory entitlements)

     • Work standards

Other possible terms include an ownership agreement (stating that the employer owns any work-related materials produced by the employee), information on solving disputes at work, or qualifications on where the employee can work after leaving the company (this is a way to limit competition between related companies).

Benefits and Drawbacks of a Written Employment Contract

A written contract is a great way to clearly define the job, your responsibilities, and your benefits. It prevents any confusion about the job.

However, be sure to carefully read all elements of an employment contract before signing it. Make sure that you are comfortable with every part of the contract. If you break the contract, there might be legal consequences. Therefore, make sure you are able to uphold every part of the written agreement.

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