Understanding Employment Contract:

Employee Agreement specifies constraints of employment of an employee in the organization he is or will be working for. Employment Agreement is a treaty commonly entered into when a business hires a new employee. It can be used for a range of various employment types, including full time, part time and fixed term or Contract.

This Agreement sets out all of the terms& Conditions of employment, including salary, job duties and benefits, work hours, privacy, annual leave & various other important key terms.

In many circumstances, once an employer selects to take on a new employee, the parties want to get started without postponement. The employer might, therefore, wish to first make available the employee with a letter which spells out some of the key terms more concisely. In these circumstances, employers may request to use a Letter of Offer, and then to follow it up with this Service Agreement.

Advantages Of Employment Agreement:

  • Safeguard Interest of Employer
  • Safeguard Interest of Employee
  • Set Expectations
  • List Down Laws of Employment

Importance Of Employment Agreement:

An Employment Agreement can be used by employers that hire a new employee, whether on a full-time, part-time, fixed term, casual or some other basis.

The employment agreement should be made on stamp paper and then both the parties will need to sign the document and keep a duplicate for their own records.


  • The Parties: The parties between whom the settlement will be enforced (the employee and the employer) should be stated clearly. The details of both the parties (names, addresses, etc) should be cited.
  • Job designation & profile: The job title and profile for which the employee is hired should be stated in the employment agreement. It will also include the duties and responsibilities for which the employee will be held responsible.
  • Remunerations and reimbursements: The salary to be received by the employee, instead of his services, should be cited clearly in the agreement. It will include the disintegration of the salary components such as the basic salary, dearness allowance, health benefits, travel expenses, PF – EPF contribution, etc. due to him. The agreement should also reference the reimbursement due to the employee for any expenditure made while satisfying his duties.
  • Leaves and other benefits: The agreement must include a section to specify the number of paid leaves the employee is permitted to during any given year and also how he can claim these. Other benefits the employee is due to receive (incentives, allowances, bonus, appraisals, etc) should also be stated in clear terms.
  • Termination of employment: The employment contract should mention the process in which the employee or the employer can dismiss the agreement. The terms and grounds on which the employee can be finished should be mentioned evidently in the contract. Employee cessation comes under the purview of several employment laws in India. Therefore, we would recommend you to consult a service lawyer while including this clause in the employment contract.
  • General terms & conditions: These may comprise the duties and rights of the employee and the employer, penalty conditions, & other important provisions appropriate to both the parties.

Employment Agreement Clause:

  • Variable salary component: This portion is dependent on the company earning enough profits during the year, and its willingness to pay a bonus to employees.
  • Notice period: It is the defined time period that one must serve from the date of submitting the resignation letter, till the date of being relieved from the company.
  • Terms of employment: Most companies do not allow their employees to carry out any other profession or business parallel to their employment.
  • Non-compete clause: It legally prevents employees from offering their services, for a given period, to other employers working in the same industry or segment (competitors).
  • Transfers & promotion policy: Details on the frequency of transfers within the company, and the basis of being promoted.
  • Probation period: This is the time that the company takes to form an opinion about the employee, work ethic, commitment & willingness towards the job, etc.
  • Additional allowance: House rent, travel, medical reimbursements, insurance cover, and other allowances are part of most standard employment contracts.

Items To Be Included In Employment Agreement:

  • Name of Employer
    Each draft must content details of Employer. Legal entity of employer is stated with its registered address is mentioned. Name and Identity of signing authority from employer side is also clearlystated in the Employee contract. In case of adjudication of Legal Notice this name address shows a big roll.
  • Name of Employee
    Name and Identity of employee is cleared stated in the contract. Purpose for Employee details is to clearly state the legal entity signified the name. It will be valuable at the time of struggle or pronunciation of punishment if any.

    1. Definitions
      Employee agreement is a legally binding document to both parties. To reduce miscommunication all the definitions of terms will be described on this section. This will comfort both parties to understand particular meaning of each legal language and legal jargons used.
    2. List of Clauses governing Employee agreement
      This is a critical part of Employee agreement. Clauses will define the nature of Employee agreement. This will quantify scope of work for both parties.

      • Stamp Duty if Involved
        Many Employees Agreements do not require stamp duty to be paid. If stamp duty payments is required by nature of Employee agreements, stamp duty need to be paid on the employee agreement according state rules. Every state has different rules.
      • Signature of Both Parties
        Signature of Both Parties is vital element of the Employee agreement, By Singing both parties give consent for receipt of the terms and condition of employee agreement. By signing the documents both parties will be accountable for outcomes of the agreement in case of breach of agreement.

How ASA Helps You Prepare Employment Agreement

It is very important that while hiring any employee whether part-time or full-time an employment agreement should be drafted.

ASA provides best service in preparing the legal documents for your company. We focus on providing simplified legal requirements and regular updates.

Our team of experienced professionals who have been doing all these legal formalities for quite a long time are completely aware of pertaining rules and regulations and ready to work for around clock.

We make sure that your every query about the process is answered. And your interaction with our representatives is seamless.

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