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written by | September 19, 2022

How to Write an Employment Contract: Types, Dos & Don'ts

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Are you faced with sudden resignations, especially due to lack of clarity on various issues? Or maybe you wish to reassure your employees regarding their job roles and related responsibilities? Whatever be the reason, an employment contract is important business document for an employer and an employee.

An employment contract includes details like the length of employment, compensation, and working conditions; how much notice the employer must give before firing or demoting an employee; and any health insurance, retirement plans, or other benefits the employer provides. In some cases, employment contracts can even include non-compete clauses that prevent an employee from working for a competitor in certain industries.

Did you know? 

It is illegal for a company to falsify employment facts. If a company does this, the worker may be permitted to depart without notification and sue for damages.

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Employment Agreement Basics

The contract can be in writing or verbal, but it's always best to have a written agreement, so there is no misunderstanding about what has been agreed upon. There are three main types of employment agreements:

Zero-hour Contract

A zero-hour contract (also called 0 hours) specifies how many hours an individual must work per week with little or no set hours per day. It's important to note that these contracts don't obligate employers to offer any specific number of hours and allow employees not to commit their time either; they're perfect for someone who wants some flexibility with their schedule. These agreements are also convenient for companies because they only pay staff when needed, thus saving on payroll costs. 

Fixed-term Contract

Fixed-term contracts are used when companies need staff for a set period. These contracts usually last from 6 months up to 3 years, depending on the length of the project, although some may extend beyond this timeframe if the employer agrees.

Open-ended Contract

Open-ended contracts are typically long-term agreements lasting for 2 years and sometimes even longer than five years, depending on whether you're employed by a company or working freelance. Sometimes you'll see open-ended listed under another name, such as permanent, full time, etc., which means the same thing.

Types of Employment Contracts

Employment contracts are usually signed between employees and employers to establish conditions and terms for their employment and establish limitations on when the relationship may end. For most employees in most states, work tenure or the work contract duration depends on the employer. That is, the company can terminate employment anytime. Employers can dismiss employees at any point if it is legally permissible.

Written Employment Contracts

An employment agreement in writing is a much more thorough document that sets out the conditions and terms of the employment contract. Certain written contracts can be considered at will, while others aren't. It is typical for executives and employees to sign written contracts that don't allow the company to remove the employee without cause and requires that they remain in the business for a specific duration.

Oral Employment Contracts

Oral employment contracts are in the form of a conversation about employment and are not written down. For example, a company owner could talk to a prospective employee over the phone, give them the job and accept the conditions of employment. The candidate's verbal acceptance of the offer is considered an oral employment contract. These contracts are legal and binding but are far more difficult to sign. If there's a breach of contract, it is the employer's word against the employee's should the matter go to the courts.

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Implied Oral Contracts

Implied employment agreements can be more complicated since they're not legally recorded and may be a mixture of oral and written documents and actions. Most of the time, concerns regarding implied oral contracts can only arise after termination because implied terms can only be considered if there is a disagreement between the employee and the employer. If a worker has autographed a work contract at will but not an at-will employment contract, they won't be in a position to claim that there was any implied, oral contract.

Permanent Employment Contracts

The most popular contract is a permanent one which means that the period of employment is not fixed. 

Fixed-Term Employment Contracts

Fixed-term employment is typically used for seasonal workers or a team member hired to assist in a particular project. They will expire upon a specified date or milestone has been reached.

Casual Employment Contracts

Contracts for casual employment are usually employed when employees' hours are not guaranteed. In a standard arrangement, the employer can promise a specific amount of hours, but they could extend the hours should they be required.

Employment and Compensation Contract Types

Code of Ethics - A code of ethics, sometimes known as an ethical code or a declaration of ethical standards, is a written document that outlines the requirements, standards of practices, and rules of conduct for a company or other organisation.

Non-Compete Arrangement - A non-compete agreement, also known as a non-compete clause or a covenant against the competition, a restrictive clause, or a non-compete clause, is a legal agreement between employers and employees that prevents employees from engaging in rival business ventures should they decide to end their employment.

Resignation Letters - A resignation note can be used to quit an official position. If you're contemplating quitting your job, you must submit a resignation form to your employer to ensure the relationship between you and your employer and establish an official record of your plans for departure and the timeframe.

Severance Agreements: A severance contract is a legal contract between the employer and employee that outlines the compensation package that an employee can receive due to the termination of his or her job.

Sample of an Emplyment Contract

Do's and Don'ts: Contracts Terms

Contracts are legal agreements between two or more people and are found across business life. While some contracts are as straightforward as a verbal contract or purchase order, some are more complicated and carry greater stakes. 

The Do’s

  • Start with a general form to guide you and modify it according to your situation.
  • Name the document with the general form as "Contract" on your computer so that you can quickly access it when required. 
  • Be sure that all parties are correctly identified in the first paragraph. Also, ensure the spelling of names correctly, and addresses are correct.
  • Include dates in your initial paragraph so that it's easy to refer to after the contract has been executed. The contract will later be identified using the date, for instance, "the November 20, 2001 Contract for the Sale of Goods."
  • Make use of correct headings to make it easier for you to identify specific provisions within the contract.
  • Number the paragraphs to ensure simplicity of reference.
  • Consider the location of punctuation marks, as even a misplaced comma could alter the sentence's meaning.

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  • Be sure to carefully consider the usage of conjunctions, specifically "and" and "or," as the words you choose could affect their meaning.
  • Make sure that the contract is inclusive of all risks.
  • Have your lawyer review every contract before signing it.
  •  Keep in mind that there's no such thing as a dumb inquiry. However, it might be a mistake to leave a question unanswered and then pay for it in the future.
  • Sign with blue or another colour ink so that the original is distinct from photocopies.
  • Inscribing every webpage of the agreement. Also, ensure that the other party does so to ensure no mistake.
  • Include notarizations if required by law.
  • Keep a copy of the contract to be kept for your documents.

The Don’ts

  • Do not include legalese or archaic terms like "the party of the first part." "heretofore," etc. They are generally not very helpful to understand the concept.
  • Avoid putting in lengthy sentences; instead, break sentences down into digestible ideas.
  • It is better to refer to an earlier section by its number or heading rather than repeating it in full.
  • Don't think the other party is defining terms the same way as you do. If you have any doubt, it is best to include a definition within the contract.
  • Don't go through the contract in a hurry. You will need time to grasp the particulars of the language.
  • Don't believe the other person's orally explained description of the phrase. Make sure to document everything.
  • Don't begin to act according to the conditions that are in your contract until you have both signed the agreement.
  • Do not agree to a contract change without confirming the modification in writing.
  • Do not assume that using the standard or form of contract is enough to avoid an attorney's review. Even if a form or standard contract performed well in one particular instance, the change in circumstances, dates, or even a party could alter the entire equation.

Step by Step - How To Write an Employment Contract 

Employer title: 

Include the title of your employment contract

Identification of the parties: 

Determine the parties within the contract of employment. It should also be done by providing the basic details about each party and their names. A company that will be the place where the employment is being conducted.

Include terms and conditions: 

The list should include the conditions and terms stipulated by the job. These are usually set by the Central, State, and local governments. This could include holiday pay, severance payments, and working hours. In addition, you must provide the company's policy on holidays, sick days and benefits, dress codes, and more.

The job description 

It should include the details on the job description to avoid surprises on any point. Your contract with the employee must clearly define the obligations and responsibilities that come with the job. If, for instance, you're looking to hire a beginner in coffee house barista, it could be possible to include the job that requires interaction with clients and customer service and coffee-making, as well as cleaning the coffee stations, directing online orders, etc.

Give details on compensation 

It is important to state the compensation for the job on your employment contract clearly and concisely. Also, you should clarify how overtime is calculated depending on an employee's position as exempt or non-exempt. Other information could include details regarding holidays pay or paid time off methods for payment and bonuses etc.

Outline contract terms:

Think about adding additional clauses to your contract, to broadly cover the common issues. The most common clauses in employment agreements are non-solicitation, privacy, probationary, failsafe and non-compete. The non-solicitation clause prohibits employees from soliciting customers and leaving the organisation. The privacy clause stipulates privacy requirements concerning employer-issued electronic devices and email. The probationary clause allows employers to dismiss an employee within the specified time frame without notice. The failsafe clause assures the employer will not offer any less than the employment standards. The non-compete clause forbids employees from competing against the employer for a specified time.

Contact a lawyer: 

Before you issue an employment agreement, it's advised to consult with an experienced employment attorney who's knowledgeable on local as well as national employment rules, regulations, and laws to make sure your contract meets the standards set by law.

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Send the contract to your employee: 

The contract should be sent by email to your employee. The employee should then go through and agree to the contract, which makes it more effective.

Conclusion

The contract should comprise the date of commencement, the title of the job, duties and responsibilities, the date of compensation, the end date or the status of employment-at-will, as well as any other terms of employment. Be aware that the contract must be equitable to both parties and should not contain illegal clauses.

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FAQs

Q: What does an employment type contract refer to?

Ans:

It outlines any conditions and terms that the parties can agree on and, once signed, it becomes the basis of any employment agreement.

Q: What is a common employment contract?

Ans:

A standard written employment agreement covers these points

  •  the official name for the company 
  • the name of the employee. 
  • The job the employee is expected to hold, e.g., labour cashier or waitress management. 
  • The responsibilities and duties on the part of employees. The time and place of work.

Q: What are the different kinds of work?

Ans:

Companies can alter their workforce requirements by employing different types of workers in response to changes in the economy and peak productivity periods. However, they must also be aware of the distinctions between different types of workers and be able to accurately categorise their employment types to avoid breaking the law.

Q: Is there a most commonly used type in employment contracts?

Ans:

The most popular contract type is a perpetual contract, meaning that the employment duration is not fixed. The employees on permanent contracts may be full-time or part-time and generally receive benefits.

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The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.