Basic Understanding Of Drafting Employment Contract

t is the process of creating comprehensive contracts by including all applicable terms and conditions in a contract draft. Our experts help in drafting contracts keeping in mind the welfare of the employee and the employer and adhering to the applicable compliances. 

Steps Involved:

  1. Gather the information
  2. List your conditions
  3. Determine the terms and conditions
  4. Lay out the consequences
  5. Determine dispute resolution system
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Drafting an Employment Contract is necessary for any and every employment. It serves as a crucial document that manages the employees by laying down the duties, responsibilities, rights of both the employer and the employee. The agreement also includes several elements such as the term of the employment, description of the position of the employee, perks and benefits, remuneration, confidentiality clause, dispute resolution clause, and such other provisions. In this article, we have discussed the components of the employment contract and the advantages of drafting an employment contract. In the final part of the article, we have discussed the process of drafting an Employment Contract.


An employment contract is referred to as a bilateral agreement between the employer and the employee where the duration of the employment for the exchange of services along with remuneration or work ethics is outlined.

Understanding Employment Contract

As mentioned earlier, the employment contract is an agreement that is signed by the employee and the employer containing the rights, responsibilities, obligations of the parties in the period of employment. The agreement is the basis of the formation of the legal relationship between the employer and the employee. Like any other contract, the Employment Contract also binds both the parties to the contract who are the employee and the employer. Understanding the components of the employment agreement is important to provide a clear as well as concise draft of the terms and conditions of the agreement between both parties. The objective of the employment contract must be also stated clearly in the agreement without any ambiguities.

Components Of The Employment Contract

The terms and conditions of the employment must be clearly defined in the Employment Contract. The following are the important components of the Employment Contract.

  • Description of the job for which the employee is being employed
  • Employment Term of the employment, whether it is full-time employment or part-time.
  • Perks and benefits available to the employee
  • Remuneration to the employee in exchange for the service of employment
  • Policy concerning leave
  • Non-compete covenants 
  • Grounds on which the employee can be terminated
  • Confidentiality clause where the information of the organization is protected
  • Dispute resolution clause
  • Governing laws in case of any dispute or Jurisdiction
  • Such other provisions as the Employer thinks fit.

Advantages Of Drafting An Employment Contract

  • One of the most important advantages of the Employment Contract is protecting the interest of both the employee as well as an employer before working for the organisation. 
  • Secondly, the Employment Contract ensures the security of the job for the employees by outlining their rights and obligations. Similarly, the employer is protected from releasing any confidential information to employees during the term of his employment. 
  • As mentioned earlier, like other general contracts, an Employment Contract binds both the employee and the employer legally on the terms agreed upon by them. 
  • By drafting an Employment Contract, both the employee and the employer get clarity upon the terms of the employment as well as other detailed information such as working hours, description of the job, responsibilities, obligations, remunerations. Thus it is important to draft a good employment agreement.
  • The contract also helps the employees provide perks and benefits such as overtime pay, holiday pay.

Process Of Drafting Employment Contract

The following steps can be used as a guide for drafting the Employment Contract.

  1. Title of the Contract- The first step of drafting the contract is providing a title or name to the contract. In this case, the title will be Employment Contract. Every agreement should begin with the title of the Contract.
  2. Identifying the parties- It is important to identify the parties to the Contract. In the case of an Employment Contract, the parties can be defined as the employee and the employer. In this clause, the name of both the parties must be mentioned as well as the place where the organization is located.
  3. Terms and Conditions: Terms and Conditions are essential and must be kept in mind while drafting an Employment Contract. Certain minimum terms, as well as conditions, are provided by the state or the central government that includes remuneration, working hours, severance packages. Job responsibilities, tasks to be assigned for performing, dress code, perks and benefits, and leave are certain other things that can be included other than the terms and conditions.
  4. Outlining the responsibilities of the position- While drafting an Employment Contract, it should also be kept in mind that any other responsibilities or new work should not surprise the employee, rather the employer is getting their job is done which is necessary. Therefore, outlining other duties is important for the position which is offered to the employee ensuring that the employee is not surprised by those responsibilities. The Contract must show clarity of the responsibilities concerning the position of the employee.
  5. Details concerning compensation- There must be a clear and direct projection of the compensation aspect in the Employment Contract in order to avoid any future disputes. 
  6. Usage of particular terms- Terms such as effective date, type of employment, term and termination, notice, dispute resolution, severability, and governing laws must be included by the employer in the Employment Contract.
  7. Adding certain other clauses- Based on the organization and its nature of business, certain other clauses such as the non-solicitation clause, which bans employees to solicit customers from a different region or leaving the country, confidentiality clause, the probationary clause must be included in the Employment Contract.

It is important for the employer to consult a well-experienced contract lawyer for drafting a proper Employment Contract. The organization can also draft the contract itself with the help of their in-house counsel and review it by an expert contract drafting lawyer. The Employment Contract should also contain boilerplate clauses, indemnity, and Force Majeure clauses.

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FAQs On Employment Related

In accordance with Indian Law, an Employment Contract with a negative covenant is valid as well as enforceable under the law, provided the parties have given voluntary consent to such contract.
There are several laws in India that govern the Employment contract, however, no specific enactment concerning the drafting of contracts is there in India. Some of the following statutory enactments governing Employment Contracts are The Indian Contract Act 1872, Industrial Relations Code, 2020, the Code on Social Security,2020, the Code on Wages,2019, Arbitration and Conciliation Act 1996.
As far as the employee is employed with the same organisation, no renewal of the Employment Contract is required. However, on being promoted the employee shall update the job description.
On refusing to sign the Employment Contract an employee forfeits the very objective of his employment and gives the impression of not attaching himself with the organisation. In certain circumstances, the employee can request to negotiate the terms of the agreement and redraft the contract.
The offer letter by an organisation for the job is an unofficial manner of presenting the candidate with the terms of the employment. However, some organisations include legal obligations in their offer letter. Whereas, on the other hand, an Employment Contract is an official legal document binding the parties to the contract as an employee and the employer.
An Employment Contract is legally valid and binding in India with certain reasonable restrictions on the employee. However, in case of presence of any unreasonable and restrictive covenants the Employment Contract is severable from other good parts of the contract.
The notarising of the Employment Contract is not mandatory however, the stamp duties must be paid for drafting the contract.
An employee can be fired by his employer depending on the circumstance and if there has been any violation of the terms and conditions of the contract. The employer reserves the right to terminate the service of employment before original termination of the employee.

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