Employment Agreement Drafting
An employment agreement sets out the job, the pay and the rules for leaving, in writing. Under the labour codes in force since 21 November 2025, every employee must get an appointment letter. We draft agreements that match the codes and hold up when an employee leaves.
What it is
An employment agreement is the contract between an employer and an employee. It records the role, the pay and the exit terms, and says what the employee may do with the employer’s information during and after the job.
The agreement is a contract under the Indian Contract Act, 1872, but it cannot cut below the labour codes. The Code on Wages, the Industrial Relations Code, the Code on Social Security and the Occupational Safety, Health and Working Conditions Code came into force on 21 November 2025. The agreement can add to what the codes give an employee; it cannot take it away.
Who it applies to
You are hiring your first employees
A new company needs a standard agreement before the first offer goes out. Once headcount reaches 20, PF registration follows too.
You hire senior or sensitive roles
Think of a Gurugram software startup whose lead developer leaves with the source code on a laptop. Roles like that need tight confidentiality, IP and non-solicit terms.
You use fixed-term contracts
Fixed-term employees must get the same wages and benefits as permanent staff doing similar work, and gratuity after one year of service.
Why it matters
Meet the appointment-letter rule
The labour codes make a written appointment letter mandatory for every employee. The agreement covers that rule.
Keep your data and designs in-house
Confidentiality and IP clauses keep client data, code and designs with the company after the employee leaves.
Settle exit terms on day one
Written notice and handover terms settle the usual exit arguments in advance.
Documents required
From the employer
- Company or firm name, registered address and CIN or registration number
- Shop and establishment or factory registration, where held
- Existing HR policies, leave rules and code of conduct
About the role
- Job title, reporting line and place of work
- Salary break-up: basic, allowances, variable pay
- Probation period and notice period you want
- Whether the role is permanent or fixed-term
For signing
- Employee’s name, address and PAN
- Authorised signatory for the employer
- E-stamp paper for the state where it is signed
Key clauses at a glance
| Clause | What it does | What to watch |
|---|---|---|
| Probation | A trial period with a shorter notice period | State how confirmation happens, in writing or by default |
| Salary structure | Splits pay into basic and allowances | Allowances above half the total pay are added back to wages under the Code on Wages |
| Notice period | Time either side must give before leaving | Allow pay in lieu; retrenchment of a worker needs at least one month’s notice |
| Confidentiality | Stops use or disclosure of company information | Can run after employment ends |
| IP assignment | Work created on the job belongs to the employer | Copyright assignment must be in writing under Section 19 of the Copyright Act |
| Non-solicit | Bars poaching clients or staff for a period | Keep it narrow and tied to confidential information |
| Non-compete | Bars working for a competitor | Enforceable during employment; after it ends, void under Section 27 |
How it works
Map the role and the workplace
We note the headcount, the state, the role and whether the employee counts as a “worker” under the Industrial Relations Code, which changes the exit rules.
Draft the agreement for your review
We draft the agreement for your review, with a salary annexure that follows the wage definition. Any legal notice or court filing arising from it must be signed by a practising advocate.
Match payroll to the contract
We check that the salary structure fits your payroll compliance set-up, including PF, ESI and TDS on salary.
Stamp, sign and hand over a copy
In practice, the e-stamp paper is generated before signing. Both sides sign, and the employee keeps a copy.
Timelines
Appointment letter at joining
Under the labour codes every employee is entitled to a written appointment letter, so issue it when the person joins.
Final wages within two working days
Section 17(2) of the Code on Wages requires wages to be paid within two working days of removal, dismissal, retrenchment or resignation.
One month’s notice for retrenchment
Section 70 of the Industrial Relations Code requires one month’s written notice, or wages in lieu, and 15 days’ average pay for every completed year of service.
What happens if a clause goes too far
A post-exit non-compete is void
Here is the catch: Section 27 of the Contract Act voids restraints of trade. In Percept D’Mark v. Zaheer Khan (2006), the Supreme Court held that a restraint running beyond the contract term is void.
A court won’t force someone to work
Section 14 of the Specific Relief Act bars specific performance of contracts that depend on personal skill. Under Section 42, the court may still enforce a negative promise made for the term of the job.
Unstamped agreements can’t be used as evidence
Section 35 of the Indian Stamp Act, 1899 bars an unstamped document from evidence until the duty and a penalty of ten times the shortfall are paid.
Picture a Faridabad auto-components firm that makes its sales manager promise not to join any competitor for two years after leaving. Three months later, the manager joins one. The two-year clause will not help. A non-solicit backed by a confidentiality clause covering the client list gives the firm a real case.
Frequently asked questions
Is an employment agreement mandatory in India?
A written appointment letter is now mandatory for every employee under the labour codes in force from 21 November 2025. A full employment agreement goes further, covering confidentiality, IP, notice and exit terms. For senior roles or anyone handling client data, a signed agreement is the safer choice. It takes one afternoon at joining.
Is a non-compete clause enforceable in India?
Only while the employee is still employed. Section 27 of the Indian Contract Act voids agreements in restraint of trade, and in Percept D’Mark v. Zaheer Khan (2006) the Supreme Court held that restraints beyond the contract term are void. During employment, a promise not to work for a competitor can be enforced, as held in Niranjan Shankar Golikari v. Century Spinning (1967). So we draft confidentiality and non-solicit terms to protect you after exit.
Can an employer enforce a non-solicit clause after the employee leaves?
Sometimes, if it protects confidential information instead of stopping someone from working. A clause that stops a former employee using your client list to poach clients is easier to defend than a blanket ban on dealing with any client. A short period and a clear link to confidential information give it the best chance.
How long can probation be?
The labour codes do not fix a single probation period for all employees, so the agreement and your standing orders set it. Three to six months is common in practice, with a written confirmation or an automatic confirmation if nothing is said. Establishments with 300 or more workers must have standing orders under the Industrial Relations Code. We align the agreement with them, so the two documents never contradict each other.
What notice period should the agreement have?
One that is equal for both sides and allows pay in lieu. Where the employee is a “worker” under the Industrial Relations Code, retrenchment needs at least one month’s written notice or wages in lieu, plus compensation of 15 days’ average pay per completed year under Section 70. Many employers set one to three months for staff and a shorter period during probation. Set it once and apply it to everyone in the same grade.
When must final dues be paid after resignation?
Wages must be paid within two working days of resignation, removal, dismissal or retrenchment under Section 17(2) of the Code on Wages, 2019. That covers salary due up to the last day. The agreement should spell out how leave encashment, notice recovery and the handover are settled, so the final settlement can be closed on time. An exit checklist makes the two-day window workable.
Who owns the work an employee creates?
The agreement should say the employer owns it, with a written assignment of copyright. Section 19 of the Copyright Act, 1957 requires an assignment to be in writing and signed by the assignor. If the period is not stated, it is taken as five years, and if the territory is not stated, India. So we draft the assignment as worldwide and for the full term of copyright, which closes those gaps.
Do fixed-term employees get gratuity?
Yes. Under the labour codes in force from 21 November 2025, a fixed-term employee becomes eligible for gratuity after one year of service, instead of the usual five years. Fixed-term staff are also entitled to the same wages, PF, ESI and other benefits as permanent staff doing similar work. The agreement should state the term, the benefits and how gratuity is calculated, so the exit is clean.
Does the salary structure in the agreement affect PF?
Yes. Under the Code on Wages, if allowances excluded from wages exceed half of total pay, the excess is added back to wages. That raises the base for PF and gratuity. From 17 September 2026 the EPF wage ceiling is ₹25,000, and PF is mandatory once you have 20 or more employees. We set the basic and allowances so the agreement and payroll give the same answer.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
The only government cost is stamp duty on the agreement at the rate of the state where it is signed. There is no filing fee, because employment agreements are not filed with any authority. Haryana and Delhi do not levy professional tax on salaries.
Ready to begin?
Tell us the role and the salary; we will draft an employment agreement that fits the labour codes and protects your business.