How To Prepare An Effective Employment Contract? (Plus Free Template)

Employment contract is must to formalize the employment relation with the company and its employees whether is for limited or unlimited period. It helps to communicate the expectations of both parties. The Employment Contract are standard for businesses in almost every industry.

Employment Contract should be signed by both the employer and the employee, in the event that the employee chooses to accept the position.

Employment Contract outlines the basics of the employment relationships. The specific clauses mentioned in the employment contract not only protects the company’s confidentiality but also provides the legal protection when either of the parties brings a dispute against each other.

Both the parties must ensure to have the valid employment agreement which in compliance with local laws and regulation.

Terms and Condition:

Date: 

Contact Issued date (date on the day of the issuance of the contract which is made between both employer and employee.

Subject:

Employment Contract (government by the laws of the country)

It is necessary to mention employer’s organization details and the employee’s full name

Position

Position or the role that the employee will undertake and the tasks that make up that role. It is nothing but the Job title of the employee.

Contract Start Date

Contract start date is the commencement /joining date of the employment with the company and the date on which employee first performs his/her service. The joining date must be clearly stated in the employment contract, as this will be considered at the end of the contract to find his end of service due

Contract Period

Contract Period refers to the contract time, whether it is for a limited period or unlimited period. If it is for a limited period, the end date must be specified in the contract. If the contract does not have any expiration date may  specify unlimited period.

Reporting To

It is important to include reporting lines, which clarify responsibilities of a role by showing who the employee reports to and who reports to them.

Duties & Responsibilities

Employer must specify its employee’s duties and responsibilities so that employee knows exactly what is expected from him/her.

Location

Employer must specify the job location where the employee will work. Employer also have the right to specify any other location in the future in this clause.

Probation Period

It is very important to include probation period in the employment contract. It is a training/trial period for the newly employed employee, which last for three months and maximum six months. Employee is not eligible for some contractual benefits. Employer may dismiss the employee with little or no notice if they’re found to be unsuitable for the role while employee is on probation period.

Remunerations/Compensation & Other Benefits:

Remuneration:

It is a monthly compensation, which is agreed by both employer as well as employee for performing the work. This must be included in the employment contract which includes : Basic wage/Housing allowance/Transportation allowance/or any other allowance depending on the organisation policy which must be paid monthly to the employees’ bank account unless separately agreed for cash payment.

Other Benefit:

Employee must informed about the benefits if any provided by the company as per the internal company policy and must specify in the employment contract (for e.g school fees reimbursement, family benefits, bonus, air travel allowance etc)

Working Hours & Overtime

Working hours must be set out expressly in the employment contract. It is the time agreed to perform the work duties and are required to be present at their place of work . Travel time is not included working hours unless it is agreed separately.

Overtime must be addressed separately if it is applicable. It is considered when the nature of job demands working beyond normal working hours calculated as per the Labour Law.

Annual Leave & Sick leave & Public Holidays:

Employer must specify the length of time for vacation. Must be in accordance with the Law and & the approval procedure as per the company internal policy.

Insurances: Medical Insurance/Workmen compensation/Life insurance etc

Employer must specify the insurance clause in the employment contract. Medical Insurance and Workmen compensation is must as per Law requirement, whereas Life insurance is based on the company discretion

Notice Period and Termination

It is the period between the receipt of the letter of dismissal or resignation date and the end of the last employment date. It is applicable for termination as well as resignation. Hence, it is must to specify the notice period in the employment contract

End of Service Gratuity

Employee must be aware of the benefits as per the Law upon termination of the employment. Therefore, it advisable to specify in the employment contract.

Non-Competition and Confidentially:

It is important to include the non-completion clause in the employment, which keeps the employee from working for direct competitors of the business during, and after their work relationship has ended for a certain period of time within the reasonable geographic location.

Employee will have the access to the confidential information in the company. By enforcing the confidential clause, it restricts the employee from discussing or using company secrets and its procedures without the express permission of the company.

Labour and Immigration Department Formalities:

Must inform the employee about the employment which will be valid only if permitted by the appropriate authorities and obtaining necessary approval for work permit and residence visa and subject to the medically fit condition as per the Law requirement.

Data Protection Clause:

This has be included in any employment contract which sets out the employer’s right to process data in accordance with the privacy notice and in which the employee agrees to comply with the employer’s privacy standard or data protection policy and other related policies.

The clauses which are included in the employment contract must be fair and reasonable to both parties, as well as legal, to be considered enforceable in a court of law.

Click here to Download the Employment Contract Template