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Employment Contracts in India

1. Minimum requirements

While labour legislations in India do not require strictly that an employment contract should be in writing, the contract is nevertheless governed by the general law of contracts in India and it is a predominant market practice (with very rare exceptions) to have all the terms and conditions agreed and signed by both parties.

Some of the common provisions of an employment contract include: (i) location, description and title of job; (ii) date of commencement, duration (whether fixed term or unlimited term) and type (whether part-time or full-time) of the job; (iii) trial or probationary period; (iv) leave entitlement; (v) salary details and other benefits; (vi) terms governing termination of employment; (vii) restrictive covenants; and (viii) governing law.

2. Fixed-term/Open-ended Contracts

Fixed-term employment contracts are permitted in India, so long as the employer is employing such person for a short-term requirement, which has been interpreted to mean a maximum of 7 (seven) years. The Indian judiciary has consistently held the position that successive fixed-term contracts cannot be used as a substitute for employing the person on a “permanent” or “unlimited term” basis.

3. Trial Period

As per Indian law, it is permitted to place new employees on a trial or “probation” period. Such a period is meant to provide employers the opportunity to assess the abilities and suitability of the employee; and hence, by definition, allow the employer greater freedom to terminate the employment of such employees during the probation period. The general market trend in India is to have a probation period between 3 (three) and 6 (six) months, especially in the technology and services sectors.

4. Notice period

Under Indian labour legislations, providing prior notice of termination of employment is mandatory in the case of employees who come under the definition of workman under the ID Act. The notice period for dismissal of workmen is either one-month, or equivalent wages in lieu thereof, depending on the total number of workmen employed in the industrial establishment.

For more information on these articles or any other issues involving labour and employment matters in India, please contact Avik Biswas, Partner at IndusLaw (www.induslaw.com) at avik.biswas@induslaw.com
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