What is an employment contract?
An employment contract is a voluntary and binding document between an employer and employee, usually in a written form. Such contract includes important aspects of the employment such as role, responsibilities, remuneration, benefits like variables or ESOPs, termination, covenants not to compete, etc.
Why should one execute an employment contract?
There are several advantages of signing an employment contract, for both employer as well as employee. Such contract fosters a positive relationship between the employer and employee. The employer can specifically capture the employee’s role, job milestones, remuneration breakup, etc. for clarity. Such contract can be referred to in the future if a dispute arises over a particular aspect of employment. The employment contract can provide a sense of stability and security to the employee w.r.t. termination clauses, term of employment, etc.
What are the key aspects covered in an employment contract?
The employment contract can include various provisions including the following:
- Employee undertakes to perform certain specified and/or implied duties for the employer.
- The contract endures for an indefinite period unless otherwise specified.
- The period of probation, if any.
- Employee is prohibited from theft or misuse of intellectual information of the employer including client details, service records, contact details, etc.
- Employee is prohibited from poaching of clients whereby the clients are deemed the clients of the business or the employer.
- Employee is prohibited from poaching or soliciting of other staff members of the employer.
- Notice period during termination or resignation.
- Payment of severance.
- Any additional benefits for ESOPs, variable salary, etc.
- Dispute resolution.