Apr 25,2019 | 10 min read

Key Essential Clauses In An Employment Contract/ Agreement

Author: Associate Runa Jasia

An employment contract is an agreement between an employer and an employee, typically, deliberate voluntary and legally enforceable, therefore, binding by nature. The employee must consent to this contract as a condition of his/her employment. Employment contracts cover a variety of procedures and policies that are required for the employer to protect its interest. It's the best feeling in the world to get a job. But it's essential that one should not forget about the employment contract before joining. One must read the entire agreement before signing in. Every employment contract is very lengthy to read but taking the time to understand the whole of the clauses can save one from future confusions. 

The three things that every employee must ensure to get mentioned by the employer in the employment contract are:

1.     Employment/Job Type and Job Role

It's important to mention the job/employment type in the deal or the agreement as it leads to knowing the career opportunities in the company further. Types of employment may vary; accordingly, they can be:

o   Full-time and part-time employees:

o   Full-time employees regularly work for an average of 38 hours per week. An employee's actual hours of work are agreed between the employer and the employee and are set by an award or registered agreement.

o   Casual employees

Casual employees are engaged on an occasional basis according to business demands.

o   Fixed term and contract

Employing someone for a fixed duration or on a contractual basis for an agreed length of time or to perform a specific task. The primary purpose behind such is to work on a particular project or to replace an employee on leave. 

o   Apprentices and trainees

They are striving for a nationally recognized qualification and must be formally registered, usually through a contract between a registered training provider, the employee and the employer.

o   Commission and piece rate employees

Paying piece rates or commission payments to employees in certain situations. Employing people in this arrangement if:

ü  Their award or agreement allows for it; or

ü  They are award and agreement free.

It's essential to understand the correct wage and leave entitlements for each arrangement. Requirements vary for this arrangement depending on the industrial relations system. 

It is crucial to go beyond the general duties to understand everything the job entails.  

Job role and responsibilities must include:

·     Specific structured details about the position's day-to-day role and responsibilities

·     How does this job role position contribute to the organization's success? 

·     What job shadowing opportunities are available for an applicant before they accept an offer? 

·     Duties of the employee, including maintenance of professional licenses, ethical actions

·     Effective Date of the agreement

·     The extent of services, including hours and days of work and describing the circumstances under which either party may terminate the relationship and the notice required for that. 

The employee will read the job description, but something like that doesn't always paint a full picture of duties. So asking questions regarding the job role will be a smart move.

2.     Leave

Numbers of leaves in a company depends upon the state of employment. Every state has different leave entitlement and policies should be seen before one defines leave policy of the company. Leave policy of any company cannot be less than that mentioned by the State's Shop and Establishment Act.

Minimum seven days of casual leave and 14 days sick leave is provided to employees.

o   Earned leaves/ Privilege leaves

These are the leaves which are obtained in the previous year and enjoyed in the preceding years. These are also known as privilege leave which can also be carried forward to a total of 3 years and vary from state to state as per the Shop and Establishment Act.

o   Casual Leave

These leaves are granted for the specific unforeseen situation where one has to required to go for one or two days. In case of casual leave, usually, the company is strict maximum to 3 days in a month.

o   Leave without pay

If a person does have any leave to his balance and situation warrants him to avail it, the Company often grants such a leave as loss of pay or that may be adjusted against the future leaves or as a particular case the special paid leave based on the personal contribution to the Company at management discretion.

o   Compensatory off

These leave are granted if the person comes on work during the holidays, generally compensated as leave to be taken or as an option.

o   Incentives, perks and notice period

Compensation incentives may include items such as raises, bonuses, profit sharing, signing bonus, and stock options. Employee incentives describe a system of rewarding success and effort in the workplace by allowing employees to earn prizes or recognition. Incentives are not all about only receiving a bonus or extra day off. It's also about recognition and reward. There are other ways through which the manager can provide incentives:

ü  Offering flexible hours

ü  Offering more bonus days off

ü  Saying thank you

It's essential to give more perks if the employees show special dedication and work for the projects. 

Regarding the notice period, if the employee gets any new job opportunity, then it's essential to know the process of resignation. A notice period is the amount of time an employee has to give their company before leaving a job.


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