Legal Guide

What is an Employment Agreement between Employer and Employee?

by Bhavya Choudhary · 3 min read

agreement between employer and employee

Introduction

An employment agreement between the Employer and employee is a contract through which the employee is hired for a specific duration. It specifically mentions all the terms and conditions of the employment in the company they will be working at.

This type of agreement is used for different types of employment, such as:

  • Fixed term employment.
  • Full-time employment.
  • Part-time employment.
  • Casual employment.

An employment agreement is also known as an employment contract. It is signed by the Employer of the company or organization and the employee or worker who will provide service for a specified period.

  • An employment agreement between Employer and employee outlines their duties, roles, responsibilities, and obligations towards each other and towards the company.

What is known as an Employment Agreement?

  • It is an agreement that is signed by both the parties, i.e., Employer and employee, where the employee is recruited for a duration that is specified by the Employer or the company.
  • The employment agreement between Employer and employee states all information regarding wage, salary, working hours, leave entitlement, and job responsibilities.

Parties entering into Employment Contract

  • Two parties enter an employment agreement; they are the Employer and the employee.
  • The parties are required to mention their contact information, addresses, names, and full details in the employment agreement between Employer and employee.
  • They must sign the contract after going through it clearly as it helps protect their interest.

How are the parties protected by an Employment Agreement?

  • The employment agreement between Employer and employee states every information needed to mitigate any issue in the future. The clauses mentioned protecting both the parties in their best interest while maintaining mutual consent between them.
  • The Employer can terminate the agreement between Employer and employee if the employee is found performing prohibited behaviors such as non-completion of duties, sharing information outside the company, and so on.
  • Similarly, the employee can take legal action against an employer if he fails to provide salary or compensation and working hours. The agreement between Employer and employee can be used as evidence in a court of law to mitigate the case.

What are the contents of an Employment Agreement?

The information and content which should be included in the employment agreement between Employer and employee are as follows:

  • Details of the parties: The names and addresses of both the Employer and employee must be stated along with the location of the company or organization.
  • Description of the job: The job details, roles, responsibilities, and obligations should be mentioned and the length of the probation period (if any).
  • Remuneration of the employee: The amount and method of payment must be stated in the agreement between Employer and employee. The wage, salary, commission, or gratuity should be briefed.
  • Working hours and leave entitlements: The employee working hours must be mentioned and also the allowed yearly leave entitlements.
  • Restrictions on post-employment: The employee is prohibited from sharing any sensitive information or any confidential contracts. They mustn’t hire any employee from the same company after they leave the job. These come into action once the agreement between Employer and employee is over.
  • Termination: The time period in which the Employer or the employee must notify the other before terminating the agreement between Employer and employee and on what grounds. The reason must also be mentioned at the time of termination.
  • Arbitration: In case of breach of the agreement between Employer and employee, they will seek help from the defined Arbitration Authority.

Validity of the Employment Agreement between Employer and Employee.

  • The position of the employee states what their contract validity is. The fixed-term employee contract states a specific time length after which the agreement between Employer and employee is terminated, and the employee can choose to work with another company or in the same company.
  • In the case of full-time employees, there are no such bounds in the validity of the agreement between Employer and employee as they don’t work for a specified time and so have no end dates in their contract. 
  • As there is no termination date, the contract is in effect until the other party decides against it.
  • The parties may or may not notify the reason behind the termination. An employee can be instantly fired if proven to be guilty of breaching the contract in any way.
  • If an employee wants to resign, they must present a resignation letter during the notice period as mentioned in the employment agreement. Any kind of queries may arise during the termination, and it is recommended to take legal consultation to mitigate any issues.
  • Internships and tourism jobs are examples of jobs that need no notification to end the contract as it has a specified date and time to be terminated through a fixed-term employment agreement between the Employer and employee.

Is Stamp Paper usage Mandatory?

The agreement between Employer and employee can be printed on the letterhead of the company, on plain paper, or on any stamp paper because what matters is the stamp charges that should be paid.

  • An employment agreement between Employer and employee can be printed on stamp paper and signed by both parties. They should keep a copy of the agreement between Employer and employee with themselves as a record of agreement to avoid further issues in the future.
  • According to the Indian Stamp Act 1899, it is suggested to follow law provisions and pay proper stamp charges, which are going to help in maintaining its legal validity. The charges are different from state to state.

Conclusion

The employment agreement between Employer and employee is the key to a long-term association. The agreement has a legal value and can be enforced in a court of law if any of the parties compromises or breaches the covenant in the agreement. Thus, it is important for both parties to take legal consultation before drafting or reviewing the agreement.

The agreement can have many clauses which may be inconsistent and contain disputed language, so it is advised to take attorney consultation before entering into any type of contract.

Bhavya Choudhary

Written by

Bhavya Choudhary

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