An employment contract is a signed agreement between an individual employee and an employer. It establishes both the rights and responsibilities of the two parties: the Employer and the Employee. The contract covers specific aspects of employment. These include employment commencement date, period of employment, wages/salary, benefits if any, brief HR policies, termination, etc.
The employment relationship must be memorialized in a document signed by the employer and employee setting forth the terms and conditions of the relationship. Not only will this document be an important part of defending any future litigation, it may well prevent such problems by clarifying the expectations of both the parties. These include wages, health insurance benefits, pension benefits, bonus, promotion, and termination, etc.
The parties can negotiate these provisions before employment begins. This allows the employment relationship to proceed without either party having to address issues later on. Having an agreement in place fosters cooperation going forward. This is because the terms of the agreement are binding and cannot be unilaterally revoked or changed.
The main advantage of having contracts of employment in place is to reduce the risk of future disputes between employers and employees. By ensuring both parties (employer and employee) are in agreement with the terms and conditions, which are then signed, this binding contract serves to reduce the chance that one party will have grounds for legal action later down the line.
For roles that involve the handling of sensitive or confidential information, a contract of employment will further protect this. A confidentiality clause will ensure that the sensitive information, which could be valuable to competitors is not leaked. Furthermore, the employee will not be able to use this information should they wish to compete with you.
Employers may utilize employment contracts as a way to ensure that their most qualified talent is bound by the terms of a contract, which will be a deterrent to employees leaving the company and an advantage to the contract.
Employment contracts can also incentivize highly skilled employees to join your company. The prospect of having a contract can ensure greater stability for the highly skilled employee. These employees may have other job offers, and a contract with appealing turns could lure top talent to your company. Lastly, the presence of an employment agreement will provide the employer with greater control over the work being done by the employee subjected to the contract provisions.
A contract limits the employer’s ability to terminate employment early or as per his sole discretion. An employer cannot make any changes in the agreement unless that has been duly agreed and stipulated in the contract by both parties. In the event of any change to be made in the agreement, the employer will have to renegotiate the contract and settle with the employee or face financial penalties for breach of contract.
There may be cases where an employer may want to terminate his employee’s employment but the employee hasn’t met the grounds for termination specified in the contract, the employer will not be able to fire him or her without breaching the contract.
An employment agreement sets the rights and obligations of both the Parties. The agreement’s “Job profile” and “HR Policy” provisions set out the contours of expectation and discipline within which an employee is expected to perform.
Employment contracts are drafted for which employees?
The employment contract is drafted for full time as well as Part-time employees
Are employment contracts the same for part-time employees?
Yes. Part-time employees have the same rights as and are entitled to be treated no less favorably than full-time employees.
At what point does an employment contract becomes binding?
Once an offer of employment has been accepted by a potential employee, a contract exists. This may occur before the employment commences.
What is the list of clauses that are covered under the employment contract?
The following indicative list of clauses are included in the employment contract–