CoverImageRolling out an Employment Agreement - Key Clauses

Rolling out an Employment Agreement - Key Clauses

By Anu Chowdhry
April 02, 2019

Well-drafted employment contracts are key to minimising disputes at a workplace. For an employer, an employment contract serves the function of retaining talent and protecting the larger business from any unscrupulous actions by employees. An employee equally stands to benefit from entering into a formal employment contract as it contains key obligations to be fulfilled by an employer such as payment of remuneration and benefits. The negotiability of the terms of an employment contract is closely related to the seniority of an employee. Key managerial personnel are better placed to negotiate terms of their employment than entry-level employees. In addition to specifics like date of commencement, designation and location of employment, some common employment terms include:

Probation

Many organizations have a probationary period in place ranging commonly from one to six months. During this period, an employer can assess an employee’s performance and suitability as well as give the employee a window to onboard and be acquainted with an organization’s practices. Some employment contracts may specify an increase in salary upon successful completion of the probationary period.

Financials

These clauses cover key aspects of salary and entitlement to benefits such as paid leave, health insurance, reimbursement of reasonable expenses incurred during the course of employment, to name a few. Some positions may also entail payment of bonus. Employers usually specify bonus as equivalent to a percentage component of the base salary or other performance metric such as sales and billing targets, in addition to specifying whether payment of bonus is guaranteed or discretionary.

Term and Termination

Some employment contracts may be for a specified duration randing from a few months to a few years, especially in project-specific hiring where employees are hired for the duration of a project. Where a project is anticipated to continue beyond initial timelines, an employment contract may allow for a further extension of the term of employment. An employment may also be ‘at will’ where an employee would be able to resign from the job at any time or an employer may be able to terminate an employee’s position at any time. Usually, an employment contract provides for prior notice to be given before termination without cause. Employers also usually reserve the right to terminate an employment contract for cause without prior notice on grounds of employee misconduct such as theft of intellectual property, fraudulent practices at work, etc.

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Anu Chowdhry

Anu is an M&A lawyer by training and now works on mergers of a different kind - combining perspectives of lawyers and engineers for legaltech solutions that deliver maximum impact to enterprises. Also a committed Saturday Night Live fan.