8 things you must know before signing your employment contract

8 things you must know before signing your employment contract

6 minutes read
Priyanka Vilas Pandit

Adv. Priyanka Vilas Pandit

Individual Practitioner
Goregaon East , Mumbai

Posted on: 16th Jan, 2017

The new year has begun. Following the trend you might have come up with a few resolutions and a list of targets you want to achieve this year. For most people, getting a new or better job will be on that list. With the population hike, inflammation and a bunch of other things, getting a desirable job may be a dream come true for many.

Now, after shuffling through a number of job openings and appearing for endless interviews, you have finally made it to the final round of the one job which promises all the things you’re looking for. It is the ideal job matching your profile and abilities.

It is quite possible that in the excitement of making it through and finally getting the job, you overlook the employment contract. Assuming legalese is just the way contracts are drafted and in a hurry to make things permanent, you sign. You need to STOP yourself right there.

An employment contract contains all the answers to the hows and whats of your service at the new company.That’s why it is very important for you to go through each and every page of your employment contract and read the fine print.

Here are a few basics to check:

  1. The spelling of your name
  2. Your designation
  3. Your date of joining
  4. Your salary structure; and
  5. Any attached annexes

Over and above these, there are other specific things too that you need to look for in your employment contract. They are:

1. Job responsibilities: You need to make sure what your major job responsibilities are. Your job description must be clearly mentioned. The probability of work dissatisfaction increases highly if the job responsibilities are not communicated or clarified transparently.

2. Holidays: Make sure all the following are clarified:

  1. paid leaves
  2. leaves which you can accumulate and en-cash later; and
  3. the leaves which will expire at the end of a specific period (yearly, quarterly, etc)

3. Salary, Bonuses and Severance Pay: Make sure that there is scope for growth in terms of salary and other related things. For this it is important to be clear about :

  1. Salary
    1. Structure of the salary
    2. How and when you will be paid.
  2. Incentives and other benefits
    1. Different types of incentives
    2. Bonuses
    3. Medical health benefits,
    4. Travel expenses,
    5. Share benefits

The criteria on the basis of how much and when it will be given should also be checked.

You should also check:

  • Monetary (and any other) compensation that you will receive if you leave the job
  • Whether you will receive the experience+relieving letter and other important/relevant documents
  • If these will be provided in case of termination as well

If you want to negotiate on any of these, you should approach the relevant authority in the company.

4. Termination and Notice Periods: You need to be extremely sensitive while reading the termination clause. The clause 'termination at sole discretion' of the employer will be harmful for you because it accords no leeway for discussion. Approach the HR manager or legal head to negotiate for more employee-friendly termination clauses. The notice period should be mentioned for both sides, i.e., when the employer terminates the employee and when the employee resigns. The penalty for not following the notice period must also be mentioned.

5. Bond: Many employers now make their employees sign a bond. Such bonds legally bind the employee to complete a specified number of years in the company before they can resign. If they resign beforehand, then they will be asked to pay a certain amount as penalty. To avoid confrontations on these, make sure that either the job is either:

  1. one you will be interested in doing for the duration mentioned on bond.; or
  2. one without any bonds

If you are told to give over certain original documents to the company, do not blindly do so. Be extremely careful because these may be retained or used as a tool to retain you as an employee. Many employees complain about not being able to quit their job just because the employer is in possession of certain important original documents.

6. Non-Compete Clause: Usually employers add a non-compete clause which restricts the employee from joining a competitor. This restriction could be on:

  1. a specific period of time or
  2. in a specific region.
  3. Try to negotiate with the company to make the non-compete period as short as possible. This will help improve your job mobility.

7. Non-Solicit Clause: This clause restricts you from benefiting from the clientele of your company after you have resigned. Keep this in mind when deciding to leave the company. Different companies have different types of non-solicit clauses, so it is better to check what your employment contract contains.

8. Non-Poaching Clauses: This particular clause means that you cannot entice your former colleagues to leave your ex-company and join your business or your company.

Usually, an employment contract is made in a standard format. This is the time when you can and should your negotiation powers. Use this ability to convince the employer in making a contract which will benefit you to the maximum extent.

More often than not, the employment contract is tilted in favor of the employer.  To avoid being cheated or taken advantage of, the employee needs to be alert and aware of the clauses that bind him. This is because the penalty for default of any of the clauses of the contract is extremely high.

The above mentioned are just few cautionary points which you must bear in mind and you must carefully review the full contract. It is important to be patient in thought and knowing what you're getting into before you ink it.

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