Important Terms to Include in an Employment Contract

An employment contract is a formal agreement between the employer and the employee. This type of agreement is used to specify the rights, responsibilities, and obligations of both parties. Moreover, it includes all the compensation and expectations of both employee and employer. This written document states the provisions related to employment which in result creates trust between the parties.

This document of employment acts as essential evidence if any conflict will arise in the future. According to this contract, both parties are bound upon the terms and conditions mentioned and understand & agree with the clauses. Some of the key terms mentioned in the agreement are as follows:

• Salary
• Work schedule
• Vacation allotment
• Benefits
• Restriction on confidential information etc.

Along with these, there are few more important clauses to be included in the employment contract to protect both your business and your new hire when making a job offer. Following are what every employment contract should include:

Title of Position Offered

It must include the position, roles, and responsibilities of the employee. If you are working as an HR or you are an employer, you should make sure that it should be added in a correct and precise manner.

Payment Terms

Another important thing to mention is the salary of the employee. It should explain the breakdown of salary and clearly mention the date and mode of payment too.

Roles and Responsibilities

It must mention the team and department the new employee will be going to work with. This will help the employee understand what the organization/employer expects from him/her so that a progressive outcome can be provided.

Benefits

Together with basic salary some other benefits that would be provided to the employee should be mentioned. Allowances, bonuses, and incentives that an employee might receive should be precisely mentioned.

Deduction

It should also mention the situations in which an employee’s salary may be deducted. These situations may include cases such as damaging office property. This helps a lot in avoiding any kind of dispute later on.

Indemnification

It must include the instructions for who will be responsible in case of damages. A good employment contract should include this clause to prevent disputes in the future.

Classification

Classification refers to whether the employment is full-time, part-time, contractual or freelancing. If it is for a fixed term, then the company needs to mention the duration the employee will be working for them.

Working Hours

The employee should know the number of working hours he/she is working on a daily basis or on average in the organization.

Vacation Policy

It is the company’s responsibility to mention the policy of leaves. This term needs to include paid leaves, optional holidays, half days, and any other type of leaves, that might benefit an employee, along with the procedure for applying.

Non-Compete

The non-compete clause states that an employee is not bound to resign whenever he/she wants to gain some experience or planning to start their own venture. There are some protocols that are required to be maintained by the employee. Under this clause, the employee agrees not to start or enter into a similar profession in competition against the current company.

Non-solicitation

This clause says that you cannot use the contacts of your old company to help the new company. When you are working for a competitor, you will not seek any business clients or use any confidential information related to your previous job.

Governing Law

It must also include the legal steps that will be taken when any dispute will arise between parties. This may include the involvement of arbitrators or jurisdiction.

Death and Disability

Death and disability term inform the employee about the compensation from the company will be provided in case of serious health injuries or death of the employee. It mentions the detail of mediclaim and the cases in which it is provided.

Confidentiality

When an employee signs the employment agreement, he/she also sign a confidentiality clause. This clause mentions that the employee cannot share any confidential information of the company with any outsider.

Termination

The termination clause helps the employee in getting job security. When, why and how of the termination is stated in this clause. It mentions the circumstances under which the organization can suspend the employee and when an employee can resign from the job. Moreover, it explains the amount of notice period to be served in case of termination as well as resignation.

These are some of the essential terms and clauses to be mentioned in an employment contract. These are some of the basic points, you can include more to define the role of the employee or the business and improve the relationship. Before signing the agreement, the employee and employer should pay attention to these points to save themselves from any kind of dispute later on.

Drafting an employment agreement can be time-consuming, confusing and tiresome. Hence, you can go digital where you will get assistance whether you are the employer or the employee. One such company where you can get the benefit of drafting an electronic agreement together with legal assistance is Feelium E-Contract.