5 Things You Need To Include In An Employment Contract

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There is no business that could scale and thrive without a dream team. Your employees are the lifeblood of your business. However, hiring the right team is tricky. 

You need to ensure that your employees are happy while your business goals are not getting compromised. 

But the question is how? 

Employment contracts just do that. 

It creates transparency while creating confidence that your team will uphold the objectives and goals of your business. 

In this post, we reveal the top five elements that you cannot miss to include in your employment contract in 2021.

5 elements that your employment contract needs to include in 2021


The first thing that your employee contract needs to focus on is being lean and flexible. If you are new to this landscape, chances are you may overlook critical points. Taking help from a professional lawyer is the best way to create confidence in your contract. 

However, if you start with self-research, here are the top 5 elements you can consider including in 2021. Including the following aspects shall support your business interests comprehensively.

  1. Confidentiality bond


One of the most critical policies that an employment contract should have is a confidentiality section. Upholding your business’s private information intact can ensure trust and a free flow of information during operations. 

Here are a few agreements you should consider following. 

  1. Non-disclosure Agreement (NDA) 

An NDA or non-disclosure agreement is a broad confidentiality agreement that outlines the information that can have a limited to no exchange policy. This can be anything from trademarks to product formulas.

  1. Intellectual property rights (IPR)

IPR is by far one of the biggest confidentiality laws that you can integrate into your employment contract. This is even more beneficial when hiring freelance or part-time employees. Intellectual property rights ensure your work or inventions are in control of your company and cannot be used without authorized consent. Copyrights are by far one of the most popular IPR businesses deal with. 

  1. Invention assignment

The most productive teams often have original, innovative ideas. These are not only useful for immediate usage but are valuable assets in the long term. By deploying an invention assignment, you can gain complete ownership of all the inventions and creative work that your employees can solve a business problem. 

  1. Employment scope

Employment scope goes into the specifics of the job scope of your new hires. It details the job term, classification, remuneration, initiation date, responsibilities and liabilities, and much more. This helps in understanding the performance of an employee over some time and helps take the necessary action.

Here are a few elements that your employment scope policy should capture. 

  1. Working hours policy

Working hours are by far the most significant information to mention in the contract. This mentions the number of working hours an employee needs to work. You can get creative here to gain flexibility for your business. 

The more detailed classifications you get into, the better for your long-term workforce health. You can consider adding a telecommuting or extra hours clause when for long-term benefits. 

  1. Employee classification

Misclassification has resulted in expensive lawsuits time and again for companies across the globe. This makes it one of the most important clauses to be entered into your employment scope. 

An employee classification entry mentions the category of relationship that employee shares with your organization. Whether they are in an arrangement of partnership, vendor, freelancer, part-time or full-time, it creates more transparency in understanding how the individual employee fits in the operations. 

  1. Service level agreement (SLA)

SLA or service level agreements are a must when partnering with a 3rd party vendor like a freelancer or agency. This helps you create realistic project expectations. An ideal SLA can consist of details like deliverables, a number of iterations and follow-ups, timelines, free after-sale service, if any, and so on. 

However, you can integrate an SLA even between two distinct departments of your company to create more transparency among the responsibilities amongst teams. 

  1. Compensations and benefits


No matter how promising or big of a brand your organization is, a systematized and transparent remuneration system is critical for building a dream team. A compensation clause ensures you and your employee are on the same page, and there is no room for dispute and dissatisfaction. Plus, you need to mention other benefits that an employee is eligible for, along with the conditions. However, all these need to be kept legally squared. 

Here are a few things that you should consider while you prepare your compensation to note. 

  1. Cost to Company (CTC)

CTC is the total compensation that your organization gives in a year to your employee. It should detail the frequency of payment, whether weekly, monthly, or quarterly, along with the tax bracket. 

  1. Perks and allowance

This clause details the added benefits that an employee is eligible for. It also mentions the terms and conditions of yielding the benefits. Creating cost-effective yet valuable benefits packages can attract quality employees.  

  1. Leave entitlements

This annexure details the leave policy of the employee for an entire year. It contains all the details of the total number of paid and sick leaves, maternity or paternity leave policy, family emergency leave policy. 

You can also add a clause of how the leave policy changes with a longer tenure period on the company. This can help in improving employee retention. 

  1. Employment policy

Creating a legal contract that states the employment terms is critical. It ensures that your employees uphold a code of conduct in the workplace. More so, it creates certain expectations in your employees regarding the workplace. Legalizing this can be a huge step in building a productive and positive company culture. Here’s what you should consider including in it. 

  1. Termination agreement

Termination agreement details the circumstances and activities involved for any of the parties, the organization, or the employee to discontinue working together. 

You can enter a no-tolerance policy of malpractices like the POSH (prevention of sexual act), anti-ragging, and more. Also, including a notice tenure for three weeks can be hugely beneficial for you to find a replacement for the team member. 

  1. Obligations post the termination period

After the termination period, creating a legal document to ensure your business interests are not harmed is critical. You can add clauses like the NDA that need to be upheld even after tenure.  

  1. Outplacement plan

An outplacement plan is really an extension of a general termination agreement focused on bringing value to the exiting employee. It ensures that you create a positive company rapport amongst the public and is more of a long-term strategic policy. 

Policies like rehires for ex-employees and recommendation letters serve as a great help for your exiting employees. 

  1. Security policy

Whenever you hire employees, there will always be a risk of malpractice. Ensuring that your business does not fall prey to the negative ramifications of these activities of a certain percentage of your hires, creating an annexure for the security of your business is critical. Here are a few elements that can help you to do so.  

  1. Job poaching contract

Ever noticed how sometimes your employees leave your company in flocks? There is no plausible reason that you can find in their exits. No patterns. Or is it? 

If you look closely, you will find that the exit of one employee instigates the exits of all others. One of your employees mobilizes others to leave your organization to join the new one. What follows is a waste of valuable resources: workforce and training resources. This phenomenon is called job poaching. 

Creating an anti-job poaching clause gives you the power to take legal actions if such malpractices are detected and verified. 

  1. Restraint of trade

Free flow of communication and information is critical for building a successful product. However, it has its shortcomings. While a transparent atmosphere is needed for productive work, a completely unrestrained workspace can negatively impact your business. 

Creating restraints in the interaction with clients and competitors of your organization will help minimize the illegal passage of sensitive information and keep your opportunities intact. 

  1. Technology privacy policy

Technology is a powerful weapon. That being said, you need to control how your employees use it. A technology privacy policy details the terms of use of technology and the internet access of an employee. 

You can restrict getting involved in any negative feedback about the company whatsoever. You can mention which sites they have limited visits to and what they cannot do with the organization’s technological assets. 

To conclude

Your employment contracts at the core must have one goal. Create watertight agreements that save the interests of your business without compromising the employee’s motivations. But you need to achieve this, ensuring you are legally squared. 

The above suggestions on creating your next employment contract are definite to bring you the benefits of some of the best HR (human resource) practices. However, always remember your contracts need to work for you. Do not shy away from customizing each contract for the best results. 

So now there is just one question left to answer. 

When are you integrating these elements into your employment contract? 

Author bioAtreyee Chowdhury works full-time as a Learning Experience Designer and is passionate about writing. She has helped many small and medium-scale businesses achieve their content marketing goals with her carefully crafted content that is both informative and engaging. She lives in Bangalore, India with her husband. She loves to read, experiment with different cuisines, travel, and explore the latest content marketing and L&D trends in her free time. You can reach her on Linkedin or write to her at atreyee.c@gmail.com.