Employment contracts are vital documents that define the terms & conditions & several other details of employment that an employer & employee should adhere to for as long as they work together.
Employment contracts are important documents for employees to have a better understanding of their role and responsibilities and the company’s expectations. A written draft of such a contract is vital to specify the employee’s responsibilities and the employer’s liabilities. Considering that the specific details of different contracts may vary for different companies, you need to thoroughly go through an employment contract before signing it.
This draft will help understand the key features of an employment contract, which will help you learn the exact expectations of your employer before you sign up for a role at their organization.
The main purpose of employment contracts is to provide job security to the employee while providing a safety net to the employer too, in case of low productivity issues. It clearly spells out the rights of each party involved and protects various assets of the company that the employee is granted access to while working for a company. This article will dive into the various aspects associated with employment contracts and give you a comprehensive idea of the same to ensure you know what to look for before signing your next employment contract.
There is a wide range of employment contracts, which are used in different instances depending upon the type of employment. Here are a few key types of contract:
This is the most commonly used type of employment contract offered to permanent employees hired for full-time. It contains all the vital information that an employee must know about and adhere to while working for the organization.
These are offered to employees that are employed to work part-time, for example, for half a day. These employees are known as part-time employees and are hired to work for a much shorter duration every day as compared to the full-time employees. Such contracts usually don’t include the benefits and bonuses offered to full-time employees.
These contracts are given to people that are hired to work on specific projects. Such contracts mainly cover the project details and act as a security for freelancers that ensures they won’t randomly lose the opportunity or have to suffer from delayed payment issues.
Individuals that work for a specific term or for a certain project or assignment are hired under the fixed-term contract.
When a company wishes to hire someone that will not be working for them, they need a consultant agreement. Self-employed individuals always need a consultancy agreement whenever they want to partner with any organization for a project/assignment or a specific period.
Under this contract, the organization is not responsible for providing a specific number of working hours to an employee, while the employee is not required to work solely for a particular employer.
| Note: Zero-hour worker contracts are relatively uncommon in India. However, they are often used in sectors where there is a high demand for flexible workers, such as the hospitality and retail industries. |
A few advantages of employment contracts are:
While we have listed some clauses commonly found in contracts of employment, different employers may have different expectations from their employees and may add unique clauses that define their expectations. Employees must thoroughly go through the contract before signing it to understand what the employer expects of them and avoid any conflicts regarding the same in the future.
Some clauses stated in an Employment Contract are:
This clause states the designation/position at which the employee is employed, in an organisation. It defines the main responsibilities and the tasks which an employee would be performing at the organisation. The employer should draft this clause carefully as the description of job is of utmost importance which defines the boundaries of work.
A fiduciary duty is the obligation of an employee that they have to act in another party's best interest. The said clause includes terms such as that the employee should not take up any independent professional assignment, safekeeping the accessories provided by the company such as mobile phone, laptop, etc.
An employee is entrusted with the trade-secrets, financial data, operating data, technologies, finances and costs, marketing, external and internal transactions of the company etc., which is basically confidential information. The employee should share the said information internally only on ‘need to know’ basis and must not under any circumstance share such information with other vendors, companies, clients, etc., as it is a property of the company.
Further, the employee should neither circumvent Company’s work with business associates, clients, and other third-party vendors.
Therefore, it is necessary to add the above-stated clause in an Employment Agreement to effectively protect the interests of the company.
The period for which the Agreement shall be valid and operational should be specifically stated. Further, other important things including the probation period which the employee must serve before becoming a permanent employee at the organization also must be specifically stated. At many organizations, there is no notice period during the probationary term, however this depends on needs and wants and may differ from company to company.
At a lot of organizations, remuneration is not a part of the employment contract as the salary is already mentioned in the offer letter provided by the Company. It is, however, advisable that the salary with proper break-up must be stated in the Employment Contract to avoid any inconsistencies.
Specific grounds of termination include willful insubordination or disobedience; theft, fraud or dishonesty; willful damage to or loss of employer's goods; partaking of bribes or any illegal gratification, harassment of any form, etc.
An employment contract is the legal binding that both the employer and employee must adhere to. Failing to do so may result in the defaulter having to face consequences and penalties, depending on the severity of the violation. It is imperative for employers to define all their expectations clearly in the contract of employment, while employees must follow the terms and conditions of employment once they have negotiated and signed the contract.
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