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Employment AgreementIndia’s #1 Incorporation Service – 125Companies Incorporated in 2012 alone
Employment Agreement• An employment agreement is a contract between an employer and worker. It covers things like hours of work, rates of pay and holidays. Every worker must have an employment agreement. It is legally binding, which means if one side doesn’t do what they’ve agreed to, the other side can enforce the agreement in the court of law.• All employment agreements must include certain mandatory clauses. Minimum employment conditions which are not specifically mentioned in your employment agreement are still legally binding, such as entitlements to annual leaves, a minimum wage and fair treatment.
Employment Agreement (contd.)• It clearly specifies the salary, timings, the duties of the employer, and also lists out your rights in form on Non- Compete Clause, Protection of IPRs, which are all extremely important.• Employment agreement and domestic help: Previously, the practise was never there. But these days, everybody is aware of their rights and they would prefer to have a written contract specifying these rights. Moreover, there are many risks of negligence which are possible, and a strong employment contract will cover all such risks.
Compulsory benefits that an employer needs to provide an employee• If one has more than ten employees, the typical benefits one needs to provide the following benefits to ones employee • Social Security; • Insurance; • Workmens compensation; • Old age pension; • Maternity benefits; • Provident fund. • The three acts governing such benefits are Employees State Insurance Act,1984, The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and Payment of Gratuity Act, 1972
Termination of an employee• As specified in the Terms, which is generally with 30 days written notice. However, all such firing must be for a reasonable cause. If the employee has been negligent, there should be sufficient evidence for the same.
Wage v/s Salary• Essentially the same thing, wages are paid on a weekly/daily basis and salary is paid on a monthly basis. Normally, when you enter into Employment Contracts, you pay salary to the employees. Salary, moreover included bonuses, gratuity, contribution towards PF, house rent allowance etc.
Laws related to the employment of an employee• The Equal Remuneration Act, 1976 contracts for an equality with which an employer treat his employees. As a general rule, an employer needs to provide equal remuneration to women and men for the same amount of work.• The worker can work for a maximum of 48 hours per week and 9 hours per day. He is entitled to one day holiday every week.• Minimum wages paid to an employees are governed by Minimum Wages Act in India. By examining the details of ones Employment one can one can determine the minimum salary along with the benefits you are bound to pay your employees.
Laws related to the employment of an employee (contd.)• One cannot indirectly appoint casual labour to overcome the labour regulations, there are restrictions on doing that under the Casual Labour Regulation and Abolition Act. The rules on Casual Labour will not affect your Employment Contract.
Legal aspects of various terms of an employment contract• Non-compete Clause: Ideally, a period of one year, the employee may not compete with your business within a certain territory, after the termination/completion of the contract. In some cases, a restriction for a period upto 18 months has been approved.• Bond Period: Courts have held it to be in Restraint of Trade several times. However, that is not to say that a bond is illegal in all cases. A bond of upto 18 months has often been held to be valid by a Court of law.
Legality of an employment contract• Strength of an employment contract: Extremely strong. A well drafted employment contract is the key to a lasting relationship between an employee and employer. It is, definitely enforceable in court. If either party breaches any covenant, the other party can sue.• It is not mandatory to print an employment contract on a stamp paper it is also fine if one prints the document on ones business letterhead. If possible, one should do have it printed on Stamp Paper. The moment one pays stamp duty on a legal instrument, the same immediately gets legal sanctity and weightage in the eye of law and the court of law will treat it a primary evidence whenever a dispute arises between the two parties concerned.
Legality of an employment contract• There is no requirement for registration of the Employment Contract.• In case of violation of any term of contract by the employee: The first and the best step would be to, send a legal notice. This is essentially a letter (signed by a lawyer) informing him of his breach and that he is liable to pay you compensation for the same.
Employees under employment contract• Apprentice’s status as employee: An apprentice is a temporary help, and there is no employer - employee relationship between you and an apprentice. Apprentices are also called interns or trainees.• NRI/ Foreign Employees: There is something known as an Employment Visa which he/she must obtain. If he already holds a Person of Indian Origin card or Overseas Citizen of India Card, that is not required.