Employment contract (Contract of employment) meaning:
It is an official agreement or term of hire issued by employer to the new candidates hired. This agreement contains the set of terms and conditions of the new employee’s employment.
Let’s discuss in detail for employee contract-
In this growing employee centric landscape, employment contracts play a significant role. Terms & conditions, language, requirement and every other necessary detail included in employment contract are slowly evolving.
Let’s explore everything necessary about employment contract forms.
What is a Contract of Employment in India?
An employment contract in India is an agreement between an employer and employee.
This agreement majorly includes-
- Terms and conditions for term of the employment
- Job responsibilities including roles and duties of the employee
- Compensation rules including salary, appraisals and other benefits
- Time and attendance terms like standard working hours, policies for comp-offs, holidays, etc.
- Exit policy and F&F settlement including conditions of termination
This agreement is sent to new joiners during their onboarding process by the HR department.
Why Is an Employment Contract Important? | Employment Contract Benefits
Employee contracts have become the cornerstone of the employee-employer relationship in the present times. Some of the major employment contract benefits are:
Relationship Bridge
The tone of the employee-employer relationship is somehow pre-set with this agreement as it helps both the parties with ‘expectations’- employer defined obligations, roles and responsibilities while employees agree over them, thereby avoiding any confusions during the term of employment.
Disputes’ Resolution
As the employment contract specify everything related to employment term, it helps in dispute resolution and establishes framework to provide basis for legal discourse in case of breach
Compliance with Laws
In this era where people want to work in an organisation that is successfully complying with government regulations, employment contracts are testimony of that mindset. It ensures employees that their organisation is statutory compliant and legally sound.
Employee Branding
Employment contracts showcase professionalism in the workplace. This agreement enhances accountability, satisfaction and experience of employees, thereby utilised as employee branding.
Termination Guidelines
Notice period, F&F settlement, terms and conditions of termination, PIP policy and other details are specified in employment contract. This information is crucial for employees while switching their jobs.
Ready to use Employee Contract Template
This contract, dated on the __ day of ____ in the year 20____, is made between [company name] and [employee name] of [city, state]. This document constitutes an employment agreement between these two parties and is governed by the laws of [state or district].
WHEREAS the Employer desires to retain the services of the Employee, and the Employee desires to render such services, these terms and conditions are set forth.
IN CONSIDERATION of this mutual understanding, the parties agree to the following terms and conditions:
Employment
The Employee agrees that he or she will faithfully and to the best of their ability carry out the duties and responsibilities communicated to them by the Employer. The Employee shall comply with all company policies, rules and procedures always.
Position
As a [job title], it is the duty of the Employee to perform all essential job functions and duties. From time to time, the Employer may also add other duties within the reasonable scope of the Employee’s work.
Compensation
As compensation for the services provided, the Employee shall be paid a wage of $_______ [per hour/per annum] and will be subject to a(n) [quarterly/annual] performance review. All payments shall be subject to mandatory employment deductions (State & Federal Taxes, Social Security, Medicare).
Benefits
The Employee has the right to participate in any benefits plans offered by the Employer. The employer currently offers [list benefits, if any]. Access to these benefits will only be possible after the probationary period has passed.
Probationary Period
It is understood that the first [time frame] of employment constitutes a probationary period. During this time, the Employee is not eligible for paid time off or other benefits. During this time, the Employer also exercises the right to terminate employment at any time without advanced notice.
Paid Time Off
Following the probationary period, the Employee shall be eligible for the following paid time off:
• [length of time for vacation]
• [length of time for sick/personal days]
• Bereavement leave may be granted if necessary.
The employer reserves the right to modify any paid time off policies.
Termination
It is the intention of both parties to form a long and mutually profitable relationship. However, this relationship may be terminated by either party at any time provided [length of time] written notice is delivered to the other party.
The Employee agrees to return any Employer property upon termination.
Non-Competition and Confidentiality
As an Employee, you will have access to confidential information that is the property of the Employer. You are not permitted to disclose this information outside of the Company.
During your time of Employment with the Employer, you may not engage in any work for another Employer that is related to or in competition with the Company. You will fully disclose to your Employer any other Employment relationships that you have, and you will be permitted to seek other employment provided that (a.) it does not detract from your ability to fulfill your duties, and (b.) you are not assisting another organization in competing with the employer.
It is further acknowledged that upon termination of your employment, you will not solicit business from any of the Employer’s clients for a period of at least [time frame].
Entirety
This contract represents the entire agreement between the two parties and supersedes any previous written or oral agreement. This agreement may be modified at any time, provided with the written consent of both the Employer and the Employee.
Legal Authorization
The employee agrees that he or she is fully authorized to work in [country name] and can provide proof of this with legal documentation. This documentation will be obtained by the Employer for legal records.
Severability
The parties agree that if any portion of this contract is found to be void or unenforceable, it shall be struck from the record and the remaining provisions will retain their full force and effect.
Jurisdiction
This contract shall be governed, interpreted, and construed in accordance with the laws of [state, province or territory].
In witness and agreement whereof, the Employer has executed this contract with due process through the authorization of official company agents and with the consent of the Employee, given here in writing.
Employee Signature
Date
Company Official Signature
Date
When Should You Ask for an Employment Contract?
Generally, employment contracts are issued to employees during their onboarding. In case employee contract did not issue that time, you can ask for employment contract during-
- Job promotion
- Change in roles and responsibilities
- Legal updates in the organisation or by government
- Post 5 years of experience
- PIP policy
What is Breach of Employment Contract?
Many times, employees hesitate to ask about a breach of contract. But if you are a genuine HR professional, it’s your responsibility to answer them beforehand.
Two of the questions you should answer to your employees must be-
“Can I break my employment contract?”
Breaking the employment contract can have certain consequences but employees can breach in case of-
- Delay in payouts
- Un-informed changes in terms and conditions
- Failure to provide mentioned benefits
- Unprecedented situations like COVID, or other emergent situations
- Urgent employment opportunities
“What if I break my employment contract?”
Breaking employment contract without any valid reasons like non completion of notice period, no delivery of promised compensation or any other conditions mentioned, can have serious repercussions like-
- Legal actions
- Loss of benefits
- Delay in F&F settlements
Termination of Employment Contract
The termination of an employment contract depends on the terms and conditions as defined by employers-
- Duration of contracts
- Legal considerations
- Contractual terms
- Circumstances involved in termination
- Conflict resolution protocol
Summing Up
Employment contract clearly defines roles and responsibilities right from the start of the employment term for employees. It aims to offer stability and ensure safety of both the parties.
Though it offers limited flexibility, is legally binding and is subjected to change through negotiation but it strengthens the employee-employer relationship.