An employment contract is an agreement between an employer and an employee, signed by both parties that sets out both the responsibilities and rights of the two parties, that is, company and worker.

It is a bilateral agreement for the exchange of service and remuneration for a given period of time. It is just like any other contract which involves essentials such as an offer, acceptance, consideration, competent parties, legal object, and free consent.

An employment contract is a document binding the parties in an employer-employee relationship.

Generally, the employer and the employee sign a letter of appointment prior to the signing of a formal employment contract to cover the period of probation unless a person employed is confirmed by the employer.

An employment contract generally includes:-

  • Particulars of the person employed i.e. the employee (name, birth date, nationality, etc)
  • Position of the Employee in the Organization
  • His work hours and duties Salary or Remuneration Allowances
  • Benefits Leave
  • Retirement Age
  • The clause regarding termination of employment
  • It is not mandatory for employment contracts to be in writing, they can be oral also. A written employment contract is preferable to avoid disputes at a later stage. The employer and employee should enter into such a contract after getting acquainted with all terms and conditions of the employment provided in the agreement and must agree upon them in the same sense.
  • A contract of employment also contains certain terms and conditions to which both employee and employer are bound. A breach of such terms and conditions will repudiate the contract.
  • Thus, to summarize, the employment contract is a contract of service between the employee and the employer to serve the latter by fulfilling all terms and conditions provided in the contract. They have become the need of the hour at the workplace to maintain better relationships between employer and employee.

Also known as a contract of employment or employment agreement, it lays out the rights and responsibilities of both an employer and an employee.
Following specifications can be included in it:

  • The agreed upon salary, commission, or wage between both parties.
  • The schedule about number of hours and days an employee is required to work.
  • The duration an employee has agreed to work for a company. This time period may be ongoing in some cases and fixed for a specified duration among others.
  • The responsibilities a worker is expected to perform in the course of employment.
  • Confidential statement might be included as part of a contract in some cases, though in most cases a worker signs a non-disclosure statement separately.
  • Contract may state that control and ownership is to be retained by company over every communication in cases employees are involved in handling email, social media, websites etc.
  • It should set out all benefits that form a part of employment including perks, 401k, health insurance, vacation time etc.
  • The inclusion of a non-compete agreement or NCC which states that when an employee will leave the job, he will not take up jobs to keep a check on future competition.
  • In most cases, employees are required to sign a contract that specifies terms of the employment.
  • It documents their salary, start date, benefits package etc.
  • In case a relocation package/ signing bonus are offered, the requirements of repayment are stipulated in case an employee terminates employment prior to a certain date.
  • Noncompete and nondisclosure clauses may be included in the contract.
  • An employee is expected to sign only if he is ready to work and can remain committed for the job. He is expected to not engage in a job search any further and reject any future offers that he may receive.
  • Once an employment contract is signed by an employee, the process of an employment contract is over.
  • An employment contract clearly defines an employee’s job, responsibilities, and benefits. It helps in preventing any confusion related to the job.
  • It also ensures that legal remedies are available to both parties when one of them breaches a condition of the contract.


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Employment Contract

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What is an Employment Agreement?

An employment Agreement is a necessary instrument while hiring any employee or consultant as it defines and addresses all the terms and conditions governing employment comprehensively plus the rights and duties of each concerned party to it.

What are the common Points included in an Employment Contract?

Common points would be the Breakdown of Salary, Notice Period, Date of Joining, and Non-Compete Clause.

Benefits of an Employment Contract?

The following are the benefits of having it:-

1. It minimizes the Risk by protecting the rights of both employers and employees. 
2. It sets the expectation of an Employee psychologically and creates a sense of respect for the terms mentioned in it. 
3. The contract defines the responsibilities and expectations of both Parties.

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