In this article, Bhawana Khanwani pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses how to negotiate Employment Agreement effectively.
The Employment Agreement is a legally binding document that employer and employee enter bona fidely. It is a contract of service which includes employee’s terms and condition of employment either by way of collective agreement or individual agreement. Such agreement elucidates job offer, employee’s duties and responsibilities while performing his job, compensation, salary, working hours, statutory entitlements, expense reimbursement, other benefits and confidentiality obligations in details.
Employment agreement are kind of standard form of contract as under such contracts terms and conditions are decided at employer’s end and it is expected from employee or person who wants a job under the applied job title to agree upon such terms. Mere agreeing upon the dictated terms and conditions of such agreement may be attractive in short term but in long run, it may be frustrating for employee as terms are not suiting his needs and expectation which results in resigning from the job in less time. It is better to avoid such situations as this will be loss to both employee in terms of losing job and employer in terms of losing human resource, further leads to loss of time and energy of both.
To avoid such situations it’s better to negotiate the term of employment agreement. Contract Negotiating means act of two or more parties discussing points of a potential partnership arrangement. The goal is for an agreement to be made that is beneficial to all involved parties. Discussions may go back and forth between parties until all points have been agreed upon. The end goal is an arrangement that is both fair and equitable to each party[1].
Negotiating employment agreement is must as it when negotiated by both employers and employee one is clear about the expectations of other and this can turn way out better for both the parties. Employee should not hesitate about negotiating the terms of employment as he is eligible for the job title and possess requisite skills and knowledge. Moreover, he must know his worth and work in the atmosphere where he can dedicate his energies to the work and in turn get best output which is beneficial both for him and his employer. While negotiating the employment many issues should be considered by employees which are enumerated below:-
Employee’s Experience/Specialization
As a junior or entry-level employee or a job title which has not prominent position in the organization, likelihoods are that employee will not be in a strong position to negotiate his employment agreement. However, if one is highly qualified and specialized in a niche area, one may have more influence to negotiate – especially if one’s skills or training he possesses are very high in demand. If one is more experienced and taking on a senior role, he will be in a much better position to negotiate the employment agreement[2].
Company Size
If one is an entry-level analyst or associate going to work for a big bank, international consulting firm or mega corporation with his recently minted business degree or other skills, he will likely have less leverage to negotiate his employment agreement. Even if one is more senior and experienced, negotiating employment agreements with big employers is still a challenge because there is a strong desire to standardize across the organization and there are often multiple layers of approvals required to deviate from the terms offered – both of which serve as easy crutches for hiring managers to reject one requests[3]. If one is considering employment with a smaller company or startups than there are chances that one can negotiate better as per their needs and further there are less chances that employers does not accommodate one’s request as they need human power for their organization.
Be Reasonable and Listen to the potential employer’s need
Think of things from the prospective employer/client’s perspective.one should not dictate the terms of employment but also listen to what the employer is asking. One must be patient and listen to the nitty-gritty explain by employer about organization, his expectation from you and then by reinforcing one’s desire to work together, and choosing your words wisely, one can make all the difference while negotiating the terms in his favour reasonably.[4]
Checklist of key issues to consider when negotiating an employment agreement
- Compensation – Compensation is the inevitable issue, but this issue should encompass different layers while negotiating including increase in base salary each year, bonus provisions including bonus on the basis of performance or discretion of Board/Company and circumstance where base salary may be reduced or delayed on happening of certain events in the company[5] and method of compensation- guaranteed based or incentive/performance base etc.
- Terms of Agreement and Scope of Duties – Agreement must specify when the agreement will terminate or if it renewed automatically and not terminates until specifically at the option of one party. Furthermore, agreement should elucidate the entire job description, procedure under one is responsible for any default and extent of liability, define the relationships whom one should report or team composition, expectation of employer[6].
- Performance Standards and Evaluation – agreement should contain a clause explaining how one’s performance is evaluated, criteria for getting performance enhancement awards, probationary period and criteria for promotions in the organization.
- Benefits/Perks – vacations including sick leaves, maternity benefit, distribution of holidays, insurance policies taken by employer benefitting employee – term of premium, benefit, whether includes family of employee or not, disablement insurance or compensation, retirement benefits – pension, gratuity etc. and paid expenses etc.
- Equity Grants – this is one of the important point one need to consider in employment agreement and while considering one must to look the percentage of equity issue, tax incentive stock options, employee stock options, employee option of use of such equity after termination of employment etc.
- Terms of Termination – agreement should contain a specific termination clause and the circumstances of termination such as termination ‘at will’ , terms of termination, compensation in case of early termination, lay off, breach of employment agreement, non-performance termination criteria etc.
- Reimbursement of Expenses – The issues regarding the right to the employee getting reimbursement expenses includes time period of reimbursement of business expenses, House rent allowance, travel allowance or provision of vehicle, cell phones, laptops, travel tickets or other such amenities[7].
- Confidentiality Restrictions – This is a point which every employer wants in an agreement. There may be separate confidentiality agreement or there may be clause included in the employment agreement itself. Employee should read the confidentiality clause carefully and should be aware of his liability in case of breach.
- Invention Assignment Issues – Companies expect that any inventions or business ideas developed by the employee related to the company’s business during the employment period, will be owned by the company. So they add such clause under which they have right over the ideas. Employee must know the extent of his right over his ideas, can he use his ideas or share it with someone else and what rewards will he get in return[8].
- Disability and Death – Many issues arise during employment which may lead to disablement so the employee should be aware of allowances or insurance cover under which his disablement is protected. Moreover, he should be aware about his rights and other benefits his family will get in case of death.[9]
- Post-Employment Limitations/ Non-Compete clause – It is now-a- days standard practice for companies to include ‘non-compete’ provisions in contracts of employment. It restricts an employee from competing with the employer or joining a competitor during the term of the employment and for a period thereafter[10]. Employee must see before joining the non-compete clause and also he must see other limitations which would bind him after termination of his employment.
- Dispute Resolution – employees must see into dispute resolution method in case of any disputes arise between employee and the management, law governing such dispute etc.
- Miscellaneous Provisions – employees may look into any other clause or any other specific clauses added due to nature of employment or company’s business etc. and negotiate such clause accordingly.
Thus, employee, while looking for job and entering into employment agreement, must negotiate without hesitation. The key to negotiation is not a quantitative issue but rather than qualitative one that is in simpler words rather than to put focus on how much to negotiate it should be seen that what should be negotiated. This is a sensitive process one must handle it with care as aggressive negotiation might lead to slip of offer out of one’s hands. Negotiation is a strong tool which should be used with little research, confidence and flexible skill to achieve the best of job offer and which in turn lead beneficial for both employer and employee.
References
[1] http://www.businessdictionary.com/definition/contract-negotiation.html last accessed on 15th.june.2017
[2] Patel, Naina: Negotiating Your Employment Agreement (aka Employment Offer Letter) ; Aug 23, 2016; https://www.shouldisign.com/negotiating-employment-agreement/ last accessed on 17th.june.2017
[3] Ibid
[4]Rice, Tamara: 10 Rules for Negotiating Work Contracts; https://www.upwork.com/blog/2010/08/10-rules-for-negotiating-work-contracts/ last accessed on 17th.june.2017
[5] Employment Contracts: the good, the bad, and the must know information; American College Of Radiology; https://www.acr.org/Membership/Residents-and-Fellows/Resident Resources/~/media/74A2FA80042146C59F3A2A2DDCC0B5D9.pdf last accessed on 17th.june.2017
[6] 12 Tips for Negotiating Employment Agreements; https://dental.gppcpa.com/enewsletters/article/12_tips_for_negotiating_employment_agreements/ last accessed on 17th june.2017
[7] Wayne N. Outten: Negotiating Employment Agreements: An Employee’s Lawyer’s Perspective; http://apps.americanbar.org/labor/lel-aba-annual/papers/2000/outten2.pdf last accessed on 17th.june.2017
[8] Harroch, Richard : Negotiating Employment Agreements: Checklist Of 14 Key Issues; https://www.forbes.com/sites/allbusiness/2013/11/11/negotiating-employment-agreements-checklist-of-14-key-issues/#1b9664be24c6 last accessed on 17th.june.2017
[9] Ibid
[10]RestrictiveClauses;http://www.businesstoday.in/moneytoday/cover-story/non-compete-provisions-in-employment-contract-validity/story/192009.html last accessed on 17th june.2017
