An Employment Agreement formalises the working relationship between an employer and an employee in India. It mentions your role, salary, and confidentiality terms. It also clearly mentions how to handle the process if someone decides to move on. Our team at the Startup Lab put together this guide. So that founders and HR teams can cover everything within the law’s requirements. Also, they can both avoid any mistakes when preparing these agreements.
Why is an Employment Agreement Important?
- It creates legal clarity on roles and responsibilities
- It will protect your confidential business information
- It also tackles any issues related to salary, termination, and notice period
- With Indian labour laws, you can stay on top of the compliance
Key Clauses in an Indian Employment Agreement
1. Job Title & Description
This gives out your role, department, reporting lines, and what’s expected of you on the job.
2. Compensation & Benefits
This section outlines your salary, bonus (if applicable), ESOPs, and other benefits.
3. Working Hours & Leave Policy
This part tells you your working days, hours, and types of leaves (casual, earned, sick) you can take.
4. Probation Period
Usually 3 to 6 months. The company will clarify whether you will stay or part ways.
5. Termination Clause
This includes the notice period needed from both sides, grounds for termination, and if there’s any severance pay (if applicable).
6. Confidentiality & IP Protection
This part outlines that any intellectual property you create belongs to the business.
7. Non-Compete & Non-Solicitation (Optional)
This restricts employees from joining any competitors or reaching out to past clients or team members.
8. Dispute Resolution
Basically, if there’s any disagreement, this part tells you where and how to resolve your issues. It can be through arbitration or a specific court’s jurisdiction
Legal Requirements for Employment Contracts in India
- Make sure the contract’s properly stamped (given by the state stamp duty laws)
- Both the employer and employee are required to sign in such cases.
- Check that every clause aligns with Indian labour laws (e.g., Shops & Establishment Act, ID Act)
- Avoid anything that’s unlawful or vague terms
Documents Required to Draft an Employment Agreement
- Employee’s personal and professional details
- Offer letter (if issued)
- Company policies (leave, work from home, etc.)
- State-specific labour law compliance documents
Common Mistakes to Avoid
- Using generic templates without any customisation
- Lack of clauses covering termination or notice period
- Not sure about the IP ownership clearly
- Failing to mention statutory compliance requirements
FAQs
No, but it is strongly advised to go for legal protection and clarity.
They can be oral, but written agreements are legally enforceable and preferred.
As there is no fixed law, it’s based on mutual agreement or state labour law.
Yes, but enforceability is limited post-termination. Still useful as a deterrent.
If offering stock options, yes. Otherwise, it can be excluded.
Usually, the Director, HR Head, or authorised signatory.
Yes. Roles like interns, consultants, and advisors may need separate contracts.
If there is any issue, it will be tackled by the dispute resolution clause first and then the Indian labour laws.
Yes, through an addendum signed by both parties.
Yes, these signs are important as per the IT Act, 2000.
It varies by state (e.g., Maharashtra: ₹100).
Not mandatory, but it adds legal authenticity.
Why Work With The Startup Lab?
- Drafted over 1000 employment contracts
- Expertise in custom clauses for startups and tech companies
- 100% Legally compliant with Indian employment laws
Need help drafting your employment agreements in India?
Contact us and get expert HR legal support today.
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