In simple words an employment contract is an agreement between the employer and the employee which describes the rights and responsibilities of the employer as well as the employee. It can be oral or written, express or implied. It helps to protect the interest of both the employer as well as the employee in case there is a dispute.
WHAT ARE THE CHARACTERISTICS OF AN EMPLOYMENT CONTRACT?
- The employer has a duty to pay periodic remuneration for work he puts in.
- Both the employer and the employee are bound by the employment contract and an expectation arises from the long-term work.
- To work the employee has every right to use the employer’s tool, materials and devices.
- The employee is below and subordinate to the employer. The employer determines the place, time and manner of working.
- The work is performed by person generally.
- The employee is legally obliged to give employer certain benefits such as remuneration, holidays, maternity leave etc.
- The employee participates in the company’s activities such as joint events with colleagues etc.
WHAT ARE THE ADVANTAGES OF AN EMPLOYMENT CONTRACT?
- An employee might accept an employment contract which provides him compensation and benefits. It is essential that an employment contract has expected salary and other benefits such as bonuses, holidays, security etc.
- It also maintains a legal record of rights and obligations of both the parties and it can be used as evidence if the contract is breached.
- If the employee develops an invention or patent using the company resources then employer may want an invention assignment clause such an assignment may specify that the company owns all inventions which the employee may have developed using the company resources such equipment, supplies etc.
- Just as there are benefits and protection during employment a severance clause or separation clause may allow the employee to get benefits such as salary or settlement payments, bonuses, extension of stock option or stock rights. There can be retirements benefits as well such as health, life insurance etc.
KEY PROVISIONS OF AN EMPLOYMENT CONTRACT
- The parties: The employment contract must state the parties which are getting into an agreement i.e. the employer and the employee. It is also very essential to put details such as the names and addresses in the agreement.
- Designation and job description: The employment contract shall signify the designation of the employee as well his job profile.
- Remuneration: An employment agreement also mentions the remuneration which the employee receives for the work he puts in.
- Benefits: The agreement also mentions other benefits such as bonus, incentives, appraisals etc.
- Confidentiality: The employer may include provision to prevent the employee from leaking out confidential information and trade secrets.
- Law applicable: It should also mention the law which would be applicable in court in case of a dispute.
- Remedies in case of dispute: It should also mention the remedy which both the parties would use in case of a dispute.
- Holidays and sick leaves: include the number of sick days the employee can take, the vacation policy, what are your expectations regarding sick leaves, family emergencies and unpaid leaves etc.
- Hours: Number of hours the worker should work for and if any other flexible working options.
- Termination: Termination requirements and the time for notice period is also mentioned.
- After termination requirements: This is done to protect your business by preventing the employee to start his own business within the same industry, within the same locale and time.
THINGS AN EMPLOYEE SHOULD SEE BEFORE SIGNING AN EMPLOYMENT CONTRACT
- Know your job title and description: It is important as it describes your rights and duties.
- Bonus and Salary: It is important to check it is the salary you have agreed upon. You should know when and how will you be paid. There might be other benefits as well such as bonus, health benefits etc.
- Cause for termination: It tells you the reasons for which the employer can terminate the contract.
- Start and end date: It is essential that the start and the end date is clearly stated.
- Notice period: Having a stipulated notice period is important because it gives both parties some time to prepare their next decision.
- Holidays and sick leave: You should also check the number of sick leaves, casual leaves, whether you can carry days to the next year etc.
- Restrictive clauses: There are some other clauses such as non-competition clauses which limits you to work for a competitor of the employer you worked for before, non-solicitation clauses prevent you from taking clients and suppliers of the employer you worked for before etc. Also need to be checked.
- Working hours: You should also check your working hours and see if they are the number of hours you agreed upon.