ESSENTIAL CLAUSES OF AN EMPLOYMENT AGREEMENT

Introduction:

An employment agreement is the fundamental instrument which governs every miniscule aspect of the employer-employee relationship. It lays down the rights, duties, and expectations of the parties during the course of the employment and beyond it.

Following clauses form an imperative component of an employment agreement:

1. SCOPE OF EMPLOYMENT:

1.1. This clause allocates a designation to the employee. It enumerates the roles, responsibilities and obligations of the employee.

1.2. It contains details like office hours, mode of working and other specifications based on the employer’s working model.

2. REMUNERATION AND BENEFITS:

2.1. Remuneration –

2.1.1. It specifies the compensation that is to be paid to the employee and the date of the payment of such compensation.

2.1.2. A remuneration clause also includes tax deductions (if any) on the base salary, bonuses, medical and housing allowances.

2.1.3. This clause also determines the date of commencement of the period of continuous service. Upon the completion of the said period, the employees can avail government’s employment benefits.

2.2. Benefits –

2.2.1. Employees are entitled to several benefits like paid sick leave(s), vacation, parental leave, annual bonuses, etc. 

2.2.2. In India, only working mothers are given 26 weeks paid maternity leave in accordance to the Maternity Benefit Act, 1961, pursuant to the 2017 amendment.

2.2.3. A progressive and inclusive policy at Zomato provides parental leave not only to the working mothers but also for its male employees. They stated that “We will be offering exactly the same benefits to men as well. There won’t be even an iota of difference in parental leave policy for men and women at Zomato going forward.”

3. NON-COMPETE:

3.1. A non-compete clause aims at restricting the employee from providing assistanceand services to direct competitors of the employer during the course of employment and upon termination, for a stipulated period of time.

3.2 Indian courts construe the validity and enforceability of this clause is based on its utilization by the employer.

3.3 It must be used to only protect one’s intellectual property and not to obstruct the employee’s right to practice a profession.

4. TERM AND TERMINATION:

4.1. Through the term clause, the date of joining and duration of the employment is determined. Employer also specificizes whether the employee is on probation or permanent basis.

4.2. As for the termination clause, it contains the following vital details:

4.2.1. Termination on account of the employee reaching the age of superannuation.

4.2.2. Termination on account of commission of gross-negligence, criminal and unethical activities. 

4.2.3. Provision for a stipulated notice period to be given to the employer/employee in the event of termination of the agreement.

4.2.4. Post-termination obligations comprises of delivery of material possessions by the employee along with receiving experience and reliving letter from the employer.

Conclusion:

It is necessary to draft a tailor-made employment agreement that can survive allcontingencies your organisation may face. The above-mentioned clauses coupled with certain boilerplate clauses and other intricacies of an agreement can help in facilitating a smooth employer-employee relationship.

Disclaimer:

The content of this article is intended to provide general guidance on the subject matter. Specialist advice should be sought about your specific circumstances.

Key Words: Employment Agreement, Deliverables, Paternity leave, Remuneration, Non-Compete, Termination.

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