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An employment agreement is a formal legal agreement between an employer and employee which specifies the terms and conditions of employment in the organisation. It is an agreement commonly entered into when an organisation recruits a new employee to establish a contractual relationship between the organisation and the employee. This agreement establishes both the rights and responsibilities of the parties involved i.e., the employee and the company.
Advantages & Benefits
- Employee Retention: Employment agreement helps in holding valuable employees for a specific period of time and regulates the employees’ exit from the organization.
- Restrictive Covenant: The agreement lays down the provisions which restrain the employee from competing against the company upon their termination.
- Code of conduct: This provision of Employment agreement controls the code of conduct of its employees and employers. Additionally, it prevents the employee from disclosing company’s confidential information.
Types of Employment Agreement
Fixed term agreement: This type of agreement gives a set end date such as six months or a year, for the employment.
Permanent employment agreement: This type of agreement applies to employees who work on a regular basis and get paid a regular salary.
Casual employment agreement: This is an agreement where no specified number of hours are allotted to the employee but provides for a minimum threshold of work hours per week.
Breach of Employment Contract
A breach of employment can be any act that may destroy the relationship between an employer and an employee. The following could be the reasons for breach of the contract:
- Change of employment contract
- Unfair dismissal
- Employer fails to pay wages/ salary as per contract
- Employees share any confidential information outside
- Employee works for a competitor when it's against the contract
Termination of an Employee
• Expected Reasons:
- Misconduct of the employee
- Breach of the employment agreement including violation of mentioned restrictive covenants
- Any criminal suit against the employee
• Rights of a terminated employee:
- Right to Receive a Notice for Termination of Employment
- Right to be heard
- Right to Sue in case of alleged illegal or Unlawful Termination
- Right to Receive a Severance Pay
- Right to have a conducted enquiry
• Laws to govern the termination: Depending upon the agreement and other factors, following laws can govern the termination:
- Indian Contract Act, 1872
- Industrial Disputes Act, 1947
- Other central/ state specific laws
- Consultation with our Experts
- 1st Draft of the Agreement
- Final draft of Agreement after revision
- Aadhar Card or PAN card of an employee
- Previous employment history (resignation letter/ termination letter, pay slips & other important documents)
- Bank details of an employee
- Qualification & other certificates for verification
According to Section 17 of Indian Stamp Act 1899, all instruments chargeable with duty and executed by any person in India shall be stamped before or at the time of execution.
It is not mandatory to pay stamp duty on employment agreement. But if it is required in any case should be paid as per the particular State’s standards.
It is a legal obligation if the Employment agreement requires a prior notice.
Employment at will means that an employee can be terminated at any time when an employer thinks fit or wants, without any reason or warning. It also means that an employee can quit their job at any time for any reason or for no reason at all.
- Name and address of both parties
- Job position and role
- Duration of job and work hours
- Probation period
- Notice clause
- Salary and wages
- Non-compete clause
- Signature of the parties
An employment agreement can be amended only when there is a genuine reason regarding any clause and mutually agreed by both the parties.