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Key Features of Employment Agreements

Employment Agreement lays down the terms and conditions governing the employment of a person in a company. Read our guide on top 10 clauses of an employment agreement.
Written by:
Abhishek Sahoo
Published on

Engulfed in a feeling of excitement of a new job, one might neglect the importance of certain legal obligations that must be fulfilled by both, the employee and the employer. Employment agreement, also known as employment contract is one amongst many such legal obligations that must be signed between the above-stated parties to ensure that all the terms and conditions related to the employment are mutually agreed upon.

The place of employment is irrelevant when it comes to employment agreements. Hiring people for a startup, an MNC, an NGO, or even a small corporation, makes it mandatory to have an employment agreement in place!

What is a Profession Agreement?

Employment Agreement is a covenant between the employer and employee laying down the provisions for the conditions of work. The document holds great relevance and is governs all aspects of the job, like duties and responsibilities, date of joining, CTC, leave clause, termination clause etc. An employment must be drafted by employment lawyers who can design customised employment contracts in accordance with the needs of your business.

Why do you need an Employment Agreement?

In case of any conflict between the employer and employee, this document will act as a validation of the terms that were mutually agreed upon by the employer and employee. The agreement is precise yet comprehensive in order to address any discrepancy and also includes the remedy in case of a breach of the agreement.

In a leading case law, an employee’s employment contract was terminated without giving him any reasonable explanation for such termination and the apex court held that even though the employment agreement clearly stated that it was the manager’s discretion to terminate any employment the same could not be done without a reasonable explanation and a notice to the effect.


Important Clauses of an Employment Agreement

To make things easier, an employment agreement checklist has been given below which enumerates all important clauses to be included in an agreement.

1. Title of Position Offered- The status and responsibilities as well as duties fall under this category. Employment lawyers ensure that this information is added in the most precise manner.

2. Benefits- The higher the position, the more are the benefits given to the officials generally, like the provision of an office car with a chauffeur.

3. Vacation and Leaves- This provision deals with the number of holidays that are allowed by the organisation. Sick leaves are also covered under this provision itself.

4. Confidentiality Agreement- The employer may at times include this provision to ensure non-disclosure of important trade secrets of the organisation.This provision at times is made in effect even after the term of employment to prevent the dissemination of proprietary information of the organisation even after they have left the organisation. 

5. Remuneration- The amount to be paid to the employee for rendering services must be mentioned by  in the remuneration clause. This clause must be added by employment advocates in consonance with the remuneration laws that are laid down in India including the Equal Pay for Equal Work (Remuneration) Act, Minimum Wages Act, etc. International conventions like Equal Remuneration Convention are also to be adhered to.

6. Termination of Contract- The why, where and how of the termination of the agreement is dealt with in this clause. This shall include circumstances when the organisation wants to suspend the services of its employee or when the employee wants to quit from the job position.

7. Reimbursement of Expenses- While conducting the normal activities of a business, the employees may have to enter into expenses that are essential for the pursuance of the business objectives. This includes having a business meeting over dinner, phone calls with clients of the organisation and for all the above expenses the organisation must be, liable to pay such expenses.

8. Golden Parachute- A ‘Golden Parachute’ must be included by labour lawyers. It is a payment or benefit guaranteed to an employee in case he is fired as a result of a takeover of the company.

9. Disability and Death- Often, large organisations that have concentrate on employee relations tend to provide for the family of the employee in instances of death and disability in the form of at times, monetary compensation or even by providing job opportunities to the family of the deceased.

10. Dispute Resolution and Remedies- The remedies and the method to be followed for dispute resolution needs to be specified by employment lawyers in case of breach of employment agreement and that is what this provision in particular deals with.

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