“Employment contract” is a word that you get to hear in the world of various professions and jobs. Some of us would have also signed it at some point in our lives, but some people who are yet to join the employment world may not know about this term in detail.
But no need to worry, as this blog is here to clear out all your doubts related to the employment contract. Doesn’t matter if you have been familiar with the term or not, you will get to learn many things about it and also the things you should take care of while signing any employment contract.
An employment contract is an important document for both parties which establishes the employment relationship. Both the employer and the employee agrees to sign the written contract where all the agreed terms & conditions are mentioned. Not all are written contracts there are various types to it as well which we will also be talking about.
What Is Meant By An Employment Contract & Its Importance
An employment contract is a legal document that consists of the roles & responsibilities of the employee, the agreed salary & benefits, work hours, tenure of a job if any, the conditions, the confidentiality of trade secrets, limitations and so on.
The employment contract works both ways it’s not just for the employee to follow but also for the employer. For eg, the day to day assigned duties in the agreement should be followed by the employee, and the promised remuneration is to be given by the employer. Also, it becomes important to take all the terms and conditions in a written contract, so that if there is any breach you can sort it out between yourselves or take an action.
It plays an important role because it gives a sense of security to both the parties, that they will follow the agreed terms in the contract and are aware of the things mentioned in the employment contract.
Also, the employment contract is not just for full-time employment it can also be made for temporary contract or part-time.
Types Of Employment Agreement
1. Implied Employment Contract
As the name suggests “implied” which means whatever is communicated through a statement, conduct or action to the employee during the interview process or said in an indirect way is an implied contract. In this type of employment, the employer and employee don’t sign the written contract nor it is verbally said.
You work for the business without any agreement or verbal agreement, because you think that the same things will be implied by the employer which he/she mentioned previously through their actions or conduct. Some may also follow the employee handbooks for understanding the responsibilities and benefits.
For eg: your employer mentioning the job security the company will be providing you is a form of implied contract, it’s not written anywhere but he/she stated about it which makes it an implied employment contract.
2. At-Will Employment Contract
It’s a type of agreement that allows your employers to terminate you from the company, it can be for any legal reason but they can’t fire them for illegal reasons which include caste, gender, sexuality and so on. No proper tenure is mentioned for the employee to continue and there is no job security as well.
It also allows the employee to resign from the job title for any reason, it can be because of change in job or city, or for any other reasons. But it’s always better to provide notice before leaving.
At-will employment contracts give the power to the employer to change the benefits, pay, work hours and so on. Working without a contract can have many disadvantages and it may often create uncertainty of losing the job.
One example of an at-will employment contract will be:
If the employer doesn’t like how an employee works or perform his duties or any other not so good reason, he/she can fire him for that purpose as well.
3. Written Employment Contract
This is the most commonly known type of employment contract and is mostly used by different companies. The employer and employee sign the legal document which is in the written form.
A written contract includes everything about the employment and the mutually agreed terms. It includes working hours, pay, benefits, sick leave, duties of the employees, holidays, employment duration, job position and so on.
So at any point in time, you feel that you are not clear about anything related to the job, you can read the contract for that matter.
4. Oral Contract
When an employer speaks to you about an employment offer and you agree to it, it’s called the oral contract. Also known as the verbal contract, where everything takes place in a spoken communication manner.
There can be evidence to this type of contract, someone who will listen to the terms and conditions you and your employer are agreeing on. At times some people also write it to remember what they spoke about at the time of the recruiting process.
By having verbal communication you get to know about the job offered, the job title, salary, tenure and so on. So if you agree to it you let the employer know during the discussion.
5. Fixed-Term Contract
As the name suggests “fixed-term” means that the employee works only for a specific time period in the organization. It can be for a project or a task or can be for fixed months.
It can also be said to be temporary, they receive the treatment just like normal employees. They get benefits, pay, protections and others. This contract can also be renewed if the contract changes into a permanent one.
One example of a fixed-term contract would be:
An employer offered you a position in their XYZ company for like 4 months for an important project for which they found you suitable then this can be considered as a fixed-term contract.
6. Freelance Contract
Freelancers are often said to be independent contractors. As they work by themselves with no such employer to guide or supervise them. As an independent contractor also you got to have a contract between you and the client. The contract is just like a typical employment contract.
The contract will include information such as the hours the freelancer will give to the work, the payment structure for the services rendered, details about the project, and other necessary things to be mentioned.
Different freelancers specialise in various categories like graphic designing, content writing, software development, tutoring and so on.
Example of a freelance contract: as a freelancer, you took up a project of ABC client, the project is to design a logo in 2-3 days and give it to the client. So all the details of this project will be mentioned in the contract along with how much pay you will take, the time period, when will they receive payment and other necessary details. This contract is made so that the freelancers have the proof because many clients deny or delay payments.
7. Confidentiality Agreement
Also known as the non-disclosure agreement, the confidentiality agreement is when the employee agrees that he/she will keep information like trade secrets or important business things confidential and will not disclose it to anyone or use it for any personal gain.
The confidentiality clause is of 2 types one is:
A. Unilateral: This means that the one receiving the information from the main person should keep the information confidential. It doesn’t apply to the person sharing the information.
B. Mutual: it means that both parties who have the information about the organization or business will keep it confidential and will not breach the contract.
8. Part-Time Contract
Part-time contracts are different from full-time employment contracts. The part-time employees don’t work full time, like the other employees.
The things which are included in a part-time contract are flexible hours, sometimes there is the specific time mentioned for the part-time, roles & responsibilities, pay structure, and others.
A person who works less than 30 hours a week in an organisation can be called a part-time employee. An example of this would be: if you are a person who does a side by side business to handle, but you want to have a side income so you prefer to go for a part-time job. After you are selected for a part-time position in the company then you and the employer agree mutually to the part-time contract and you work for a few hours only.
Things That Should Be Taken Care Of While Agreeing /Signing An Employment Contract
Before proceeding towards all things to keep in mind, one thing that is important while signing an employment contract is to read the entire agreement twice by not skipping any part. If you agree to all the things written in the document and have no problem with any part of it then only you must sign. Without reading you will not know the obligations you are agreeing to and this may lead to trouble. Now let’s get back to the things you must check in an agreement before signing it.
1. The Job Title
The first thing you should look for is the job title, is it the same that you applied for and were interviewed for make sure to check. So that you know about your position and title in the company.
2. Roles & Responsibilities
After checking your job title, check if your duties & role in the organisation matches the job description and the responsibilities discussed at the time of the interview. If you see any role or responsibilities which doesn’t match your skills or the job that you applied for, you can talk about it with your employer and sort things out. Don’t just ignore it.
3. Timings & Work Hours
For someone who is a full-time employee, it’s necessary to check when you will commence your job and how many hours you will work for. If you think the working hours are not the same as mentioned to you in the interview, then have a talk with your employer and clear things out.
For those of you who work as an independent contractor, your work timings depend on you, so you can mention how much time you will be giving and at what time so that your clients know about it.
Also get to know about the overtime clauses if any, so that you will get a clear idea of how it works and what compensation will be provided.
4. Remuneration & Benefits
Talking about salary, make sure if it’s the same that was mentioned in your appointment letter or discussed in the interview. Many companies also offer various benefits to their employees in the salary package.
Some of the benefits are given below:
Paid vacation to any country or place, performance incentives or festival bonuses, health insurance or life insurance, paid sick holidays or medical leave, programs or workshops for employee training, pension plans after retirement and so on.
5. Holiday Policy & Sick Leave
Get to know about how many days off you can take, and how many days prior you need to inform before taking leave & what will be the process like. Know about the company’s leave system how many holidays it gives you annually including the festivals.
Also check whether your sick leaves would be paid or not, as some companies do provide paid sick leave. If you are not a full-time or part-time employee but an independent contractor then you may not need to ask someone else for leave, as it depends on you. Also, freelancers don’t get any benefits from any employer they have to pay for their benefits themselves.
Some companies do provide their employees with pension plans while some companies may not have it. Check in the contract whether anything related to pension is mentioned or not.
Companies that provide a pension scheme for employees is written in your legal contract.
7. Clauses & Company Policy
The employer and employee on a mutual agreement sign the contract which also consists of various clauses. Given below are the clauses that you should read thoroughly in a contract. All these clauses come into effect after the termination of the employee.
a. Confidentiality Clause
As mentioned in the above confidentiality agreement, this contract is made for protecting the client information and also the confidential information of the business. After agreeing to this clause the employee has to keep all the trade secrets or information of the company safe and not use it for any personal purposes.
b. Restrictive Clause
This means that the employee is not allowed to give any sort of information about a company he/she used to work with in the past. Information like strategies, customer information, confidential secrets, and so on. This type of clause is to protect the business and avoids the misuse of company information.
This clause includes that an employee agrees that he/she will not use or give past company’s client’s details, contacts, customer information and others to his/her former company when they exit the organization. This clause can be written under the non compete agreement or can come separately.
d. Non-Compete Clause
Under this clause, an employee agrees to the terms that he/she will not start any trade practices or business against his past employer. Also, this clause includes that the employee will not work for any of the competitors of the company.
e. Non-Poaching Clause
Under this clause, no two businesses will try to poach each other’s employees. For those of you who aren’t aware of the term poaching, it means that the company recruit employees from a competitive company. They are contracts between the employers of the same field companies to not recruit employees of each other.
f. Non-Dealing Clause
This clause states that the employee must not contact or deal with clients that are of his prior company.
About the company policy make sure to read it thoroughly so that as an employee you understand how the code of conduct & rules the company follow.
If you are someone who is a fresher, or even someone who is currently finding a job or is on its way to getting hired by a company. Make sure that you don’t ignore any part of the agreement while signing it.
Even for the ones who are in the freelancing business, it becomes important for them as well to have a legal contract, where you can mention all the necessary terms and conditions so that if there is any misunderstanding or a breach you can sort things out with your client, as the document is in written form.
Also, you can always go to a law firm or a lawyer to get your employment contract checked. These were some of the things you need to take care of before signing an employment contract. I hope you all found this blog informative and got to learn about different types of employment contracts.