employment agreement

This article, written by Ishan Sharma, discusses the key clauses in an employment agreement from the employer’s perspective. He is also pursuing Diploma in Entrepreneurship Administrative and Business Law from NUJS, Kolkata.


India being a developing country and considered to be a leading market for cheap labor and investment after china. India has forgone many laws relating to the employees who are being recruited by the employers and in order to bind the relationship of the two, a bilateral covenant has to be initiated which can only be satisfied through the employment agreement. A healthy relationship between the two can only be considered once agreement is being formed, duties are assigned, wages are fixed, and social security and benefits are rendered. Whenever an agreement is constructed it should keep a balance of the clauses in it where the employee and the employer form consensus and should not try to dominate in any manner through the averment of the said clauses. Averments to the said clauses will be initiated once both the parties agree on it and promise to work as they are inked with a view to avoid such discrepancies in the prospective time to come and cease them to work over and above the jurisdiction as assigned to them.

Familiarizing the scope from Employers perspective

In India, employees enjoy the protection of diverse laws and regulations. Keeping in mind such legality, the scope of framing an employment agreement should be in such a manner where the employee could produce maximum output in lieu of motivation rendered from the employer in the form of salary, incentives, allowances, bonuses etc. Also, whenever any such agreement formed neither of the parties in the mentioned agreement should try to exceed the jurisdiction from its obligation as per the clauses mentioned.

Essential feature Initiated

The essential feature of an employment agreement stipulates the following:

Download Now
  • Offer or Proposal:

The first base to form an agreement originates form Offer or Proposal. It is the first step where the employer takes the initiative to place an offer before the suitable candidate to get recruited and after the assent of the other to such an abstinence forms to make a proposal.

  • Acceptance:

After the initiation of the first step to make a proposal and giving an assent to the same legally binds the both which forms a promise.

  • Consideration:

So, once the acceptance to the proposal has been initiated, consideration for the said promise has to be made. Otherwise, an agreement without consideration is void.

  • Competent Parties:

Each party when enters into contract has to ensure that before making an employment agreement binding that the parties are competent enough i.e. must have attained the age of majority, must be of sound mind and is not disqualified from contracting by any law.

  • Legal Object

At the time of making a wireframe of an agreement, it has to be taken into consideration the legal object of the agreement which is not forbidden by law; should not be fraudulent; does not leads to the injury of the person or property of the another or is opposed to the public policy. Otherwise, the agreement framed will be void.

  • Free Consent

At the time of preparing the agreement, both the parties must be given their consent in a free manner without any undue influence, fraud, mistake, in order to circumvent or with a motive to disclose confidential information.

Factors responsible for making an employment agreement binding and considered substantial from employers perspective

An employment agreement is a bilateral agreement for an agreed duration for the exchange of services in lieu of remuneration offered to the employee. The statutes applicable to employer-employee relationship run in numbers and are complex. The statutory regime exists both at the national and state level. Following are the factors which are considered substantial and make the agreement core important. These are:

  • Working Conditions

The utmost important factor when an employee start working is the environment he lives in to do a work or job assigned and what all procedure the company follows to keep a healthy relationship/bond between an employer and an employee which are

  1. Job Description: Whenever an agreement is formed it is formed on the base platform of what kind of a work is required to be assigned to an employee. Without job description, the agreement cannot be initiated.
  2. Leaves: It can be a weekly holiday, national or public holiday or an annual leave, sickness/casual leave, maternity leave or carry forward leave. These are embodied in the agreement so as to make it clear as to when leaves are granted.
  3. Working hours: Depending upon the nature of a company an employee is working the statues provide a maximum number of working hours an employee is required to work which is to be refreshed in the employment agreement clauses as well.
  4. Remuneration: The clauses should settle the issues relating to the salary and the allowances offered to an employee with the best package it has and also in compliance with the statutory laws so as to avoid any confusion relating to such payment terms in future time.
  5. Term of Employment: The term is also an important factor to ensure once the work assigned has been completed. It is the term which defines the validity of time or his existence in the company when in employment.
  6. Women Safety: When a women employee comes into the working operations of a company it is mandatory to look after her safety and security. This can be achieved providing internal complaints committee, organize workshops and awareness programmes at regular intervals etc.
  • Social Security Benefits

Employee’s insurance policies and provident fund are the important factors which should be taken into consideration for providing benefits with compliance of statutory laws like the EPF etc. to make the employee socially secure and enabling them to do work without nay hassle.

  • Enforceability of Employment contracts

Following are the factors which are required to be considered in enforceability these are:

  1. Restraint of trade: It specifies about the restriction on the part of an employee not to engage or keep any business relations with another company who are also carrying same line of business and it also applies to post-termination for a period of time.
  2. Non-Compete clause: An employee is not bound to resign himself whenever he wants in view of gaining some experience to start on his own. There are certain protocols which are required to be maintained by him. This is why the clause stating “Term” has been initiated and with a view to avoid a threat to compete.
  3. Non-Solicit/Poaching clause: When two employers which prohibit the other from enticing each other employee are enforceable as to the restrictions imposed is upon the respective employers.
  4. Confidential clause: The confidential clause is enumerated so as to avoid any confidential matter to be released to the open public and enforcing the same from levying a penalty.
  5. Dispute resolution mechanism: The agreement should invoke a clause which should in actuate the mode of solving a dispute when one arises in the future and accordingly it should be implemented without any hesitation.
  • Termination

A standard part or a substantial part of an employment agreement is termination where it is to be taken into consideration the factor which has led to terminate an employee by the employer.  It is also mandatory to give specified reason to the employee terminated with a specified time period in the form of notice to make it legal and obligatory. But it may be noted in the case like that of misconduct which does not require any enquiry or so and the decision can be commenced without intruding the disciplinary committee, the company can terminate such employee even without notice by giving a reasonable opportunity of hearing. Also, the company should also include return of property policy in its clauses at the time of termination or when the employment ends which was being served to the employee while employed at the company.

  • Post-termination

As per the modern days of the present era, the tendency of doing a fraud just like copy and paste which takes a fractions of time to come into effect, so it is mandatory some post-termination clause must also be initiated to cease an employee to be working in a rivalry company or a company having same line of business so as to keep the company and its goodwill safe.


As the employment agreement is the core proof which makes the employee binds with the employer and the company and the reason to be employed by the company, it is in fact condition precedent to frame the clauses of such agreement with due diligence and scrutiny. The agreement should be vetted from time to time as per the changing conditions of the company and also as per the statutory legislation of the country where the company is situated.   


Please enter your comment!
Please enter your name here