15 December 2011

10 Must-Know Factors About An Employment Contract

An Employment Agreement is a tricky thing and needs to be handled cautiously. Every candidate must read an employment agreement thoroughly and understand all aspects of it before signing it. Hidden clauses or loopholes in an agreement can cost an employee a lot and can even adversely affect his/her career. Here are a few factors one must keep in mind while agreeing to the terms of a contract.

1) Pay Package and Perks:

The first thing a new joiner thinks about his/ her job is the salary or the pay-package. After all, monetary gain is one of the essentials of a job, though not the only one. Thus, it becomes exceedingly important for an employee to thoroughly clarify all doubts pertaining to this aspect. An employment agreement should clearly mention the basic pay, deductions and perks of an employee. It is advisable to have all information regarding pay in a written form in order to avoid discrepancies in the future. Pay based on performance or meeting targets should also be mentioned in the employment contract. One should also clarify the mode and date of payment of salary.


2) Job Description, Duties and Reporting System:

An 'employee-to-be' should mandatorily ask about his job roles, duties, responsibilities and tasks before signing a contract. It is of utmost importance that a person understands what is expected of him/ her because failure to understand job roles can have hazardous effects on both, the employee and the organization. If one does not fully comprehend the job roles, one might get frustrated, irritated, error prone, display poor performance at work, depressed and can even be suicidal. The adverse effects of a job not well understood are many because if one does not like his job, he will never be happy with it.

 3) Presence of a Bond:

This is one of the ways an organization checks its attrition rate. By depositing a fixed amount of money, decided entirely by the company, a new employee is bound to work in the organization. If the employee exits the company before the stipulated period, he/ she will not get back the deposited amount. This is a sure-fire way of checking employee turnover. This is not a mandatory clause in all organizations because depositing money acts as a deterrent for new employees. Usually, public sector organizations have such a clause. An employee must carefully think over whether he/ she is comfortable with this aspect of the contract. Any hesitation in this aspect, one should rethink joining the organization.


4) Non-disclosure Agreement:

This agreement basically talks about how an employee of an organization should not disclose any inside information regarding the organization to any external agent. In case of breach of contract in this regard, it can lead to serious consequences and can even culminate into a lawsuit. One should keep all office information tightly locked up within the four walls of the office. One exception in this case can be the reporting of wrong-doings or misconduct on the part of any employee, which is also called whistle-blowing. This should be done only in grave cases and not minor ones.

 5) Period of Probation:

All employees of an organization go through this as the concerned organization needs to test the new joiner to see if he/ she is fit to work in the company. This, usually, is a wary phase because many organizations mention as to how an employee under the probation period can be terminated without prior notice and also pay. An employee must be comfortable with the length of his/ her probation period before joining. Employees must work harder during this period and steer clear of any activity that might jeopardize their employment. This period, though full of road-bumps, is a good learning time for all new joiners as employees learn all aspects of their workplace.


6) Policy of Leave:

Another thing that new employees literally die for is leave. One can never be sure of a workaholic, but most employees literally go ‘TGIF’ (Thank God It's Friday) on Fridays. Apart from regular leave (usually weekends), employees under the probation period are usually not given any day off, except for sick-leave.  Even casual leave is not allowed during this period. After completion of probation period, all employees of an organization are entitled to various types of leaves. One must also keep a check on the holidays one can carry forward to the next year and which ones to encash in the same working year.

 7) Termination Provision:

This is, perhaps, the gravest of the clauses in an employment agreement. This clause is one that no employee can fully understand or completely evade. This is entirely decided by the concerned organization as to who it wants to remove. Various organizations mention the procedure of termination and what exactly to pay the terminated employee. Sometimes, organizations can terminate employees without prior notice and also pay. This, too, is mentioned in employment agreements. It is always better to clarify with the head of the organization as to why one has been terminated. This helps an employee to stave off the reasons instrumental in his/ her termination in the future.


8) Intellectual Property:

Intellectual Property (IP) includes – Patents, Trademarks, Copyrights, Trade Secrets and the like. IP usually pertains to organizations that are associated with inventions and creations. Various forms of art also fall under this category. Many organizations give their employees the freedom to come up with their inventions but reserve the rights of using the inventions only for the concerned organization. An employee working in such an organization should be able to face the fact that the credit of his/ her invention will not be attributed to him/ her. This is something an employee of such an organization must understand and accept. One can also look at this from the angle of working for the greater good.

 9) Non-solicitation Clause:

This is also called the Covenant Not to Compete. This clause talks of how an employee is barred from joining certain organizations after leaving the organization. This, again, is not a mandatory clause and differs from company to company. Here, the employee who exits the company is barred from working in rival companies. This is one of the ways to keep competition at a low level because after completion of probation period, an employee can opt to work in another similar firm. This can be with respect to either or both, company clients and other rival companies. Hence, one can try and keep away from companies which stress upon such a clause as it might be detrimental for one’s career.


10) Moonlighting:

This clause talks about whether employees of an organization are allowed to have more than one job or not. This usually pertains to companies which offer part-time job but might also hold true for other organizations. One should not keep the fact of working in another organization from the company in which one is working. This can lead to breach of contract and even serious consequences. It is always better to clarify all doubts pertaining to this aspect for one must never be dishonest with the place that helps a person earn his bread.