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Employment Agreement (Labour Code Ready)

A balanced employment agreement for Indian employers and employees, updated for the four Labour Codes, with symmetric notice and no post-exit non-compete.

An employment agreement sets out the full terms of a job: role, pay, benefits, leave, intellectual property, confidentiality and exit. Employers use it alongside the statutory appointment letter for salaried staff, especially in mid and senior roles.

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What to watch when you use this

The four Labour Codes came into force on 21 November 2025. Rules under them, especially State rules, vary and are still being finalised in several States, so confirm the position for your State.
The Code on Wages, 2019 defines 'wages' so that if excluded allowances exceed half of total remuneration, the excess is treated as wages. Structure the salary annexure with this in mind, because it affects provident fund, gratuity and other benefits.
Section 27 of the Indian Contract Act, 1872 makes agreements in restraint of trade void, and courts have generally refused to enforce non-competes that apply after employment ends. This template omits one.
The Code on Wages, 2019 requires wages due on resignation, removal or dismissal to be paid within two working days. Long full-and-final settlement timelines in old formats need updating.
Training bonds and fixed exit penalties are tested against Section 74 of the Indian Contract Act, 1872: a court will generally award only reasonable compensation, not the full sum stated.

Stamping and registration. Stamp duty is a State subject, and an unstamped or insufficiently stamped instrument is generally inadmissible in evidence under Section 35 of the Indian Stamp Act, 1899 until the duty and penalty are paid. Registration requirements are separate and depend on the instrument and the State. Confirm both for your State before executing this document.

Template

EMPLOYMENT AGREEMENT

This Employment Agreement is made on [DATE] at [CITY] between:

[COMPANY NAME], a company incorporated under the Companies Act, 2013, CIN [CIN], having its registered office at [ADDRESS] ("Company"); and
[EMPLOYEE NAME], son/daughter of [PARENT NAME], residing at [ADDRESS] ("Employee").

1. APPOINTMENT
1.1 The Company employs the Employee as [DESIGNATION] in the [DEPARTMENT] function, reporting to [REPORTING MANAGER / DESIGNATION], with effect from [JOINING DATE].
1.2 The employment is [permanent / fixed-term for a period of [PERIOD] ending on [END DATE]]. A fixed-term employee will receive the same hours, wages, allowances and statutory benefits as a permanent employee doing the same or similar work, on a proportionate basis where applicable.

2. PROBATION
2.1 The Employee will be on probation for [PERIOD, NOT EXCEEDING SIX MONTHS] from the joining date.
2.2 The Company may extend probation once, by up to [PERIOD], by written notice before the probation ends, stating the reasons.
2.3 If no written extension or termination is issued before the probation ends, the Employee will be treated as confirmed.

3. PLACE OF WORK AND DUTIES
3.1 The Employee's place of work is [LOCATION], with [hybrid / remote] working as per Company policy.
3.2 The Company may transfer the Employee to another location in India only with reasonable notice of at least [NUMBER] days, and will bear reasonable relocation costs as per policy.

4. WORKING HOURS AND LEAVE
4.1 Working hours, weekly off, overtime and leave will be in accordance with the Occupational Safety, Health and Working Conditions Code, 2020, the shops and establishments or other law applicable in [STATE], and Company policy, whichever is more beneficial to the Employee.
4.2 The Employee is entitled to [NUMBER] days of earned leave, [NUMBER] days of sick or casual leave and the public holidays notified by the Company each year.

5. REMUNERATION
5.1 The Employee's remuneration, with each component shown separately, is set out in Annexure A. Salary will be paid monthly by bank transfer on or before the [DAY] day of the following month.
5.2 Tax will be deducted at source, and other deductions will be made only as permitted by the Code on Wages, 2019.
5.3 Variable pay will be paid according to written criteria shared at the start of each performance period. Statutory bonus, if applicable, will be paid as required by the Code on Wages, 2019.

6. SOCIAL SECURITY BENEFITS
The Employee will be covered for provident fund, employees' state insurance (where applicable), gratuity and maternity benefit in accordance with the Code on Social Security, 2020 and the rules under it. A fixed-term employee will receive gratuity as provided under the Labour Codes for fixed-term employment.

7. EXPENSES
The Company will reimburse reasonable business expenses incurred with prior approval, within [NUMBER] days of submission of a claim with supporting bills.

8. CONFIDENTIALITY
8.1 During and after employment, the Employee will keep confidential and not use, except for the Company's business, any non-public information of the Company, its clients or partners that the Employee receives because of the employment.
8.2 This obligation does not cover information that is public through no fault of the Employee, the Employee's general skill, knowledge and experience, or disclosures required by law, a court or a regulator.
8.3 The Employee will process personal data only as authorised by the Company and in line with the Digital Personal Data Protection Act, 2023 and Company policy.

9. INTELLECTUAL PROPERTY
9.1 Under the Copyright Act, 1957, the Company is the first owner of copyright in work made by the Employee in the course of employment. For other intellectual property, including inventions and designs, created by the Employee in the course of employment, the Employee assigns all rights to the Company worldwide, for the full term of protection, and will sign any further documents reasonably required, at the Company's cost.
9.2 Clause 9.1 does not apply to work created outside working hours, without use of Company resources or confidential information, and not relating to the Company's business or reasonably anticipated research. Pre-existing work of the Employee is listed in Annexure B and remains the Employee's.

10. OUTSIDE ACTIVITIES
During employment, the Employee will not work for, or hold a material interest in, a competing business without the Company's written consent. Other outside work must be disclosed and will not be unreasonably objected to.

11. TERMINATION
11.1 After confirmation, either party may terminate this Agreement by giving [NOTICE PERIOD] written notice. During probation, the notice period is [PROBATION NOTICE] for either party.
11.2 Either party may pay salary in lieu of all or part of the notice period. The Company may also waive any part of the notice period served by the Employee.
11.3 The Company may terminate employment without notice for proven serious misconduct, after giving the Employee a written statement of allegations and a reasonable opportunity to respond.
11.4 A fixed-term employment ends on its end date unless extended in writing.

12. EXIT
12.1 Wages due on separation will be paid within two working days of the last working day, as required by the Code on Wages, 2019. Other dues, including leave encashment and reimbursements, will be settled within [NUMBER] days, and gratuity within the time required by law.
12.2 The Employee will return all Company property, documents and data on the last working day, and the Company will issue a relieving letter and experience certificate within [NUMBER] days after that.

13. NON-SOLICITATION
For [NUMBER, NOT EXCEEDING TWELVE] months after leaving, the Employee will not actively induce any employee of the Company with whom the Employee worked to leave the Company. This clause does not prevent the Employee from joining or working for any employer, including a competitor.

14. TRAINING COSTS
If the Company pays for external training costing more than ₹[AMOUNT], and the Employee resigns within [NUMBER] months of completing it, the Employee will repay the actual documented cost, reduced proportionately for each month served after the training.

15. GOVERNING LAW AND DISPUTES
This Agreement is governed by the laws of India. Nothing in it prevents either party from approaching any authority or forum available under the Labour Codes. Subject to that, the courts at [CITY] will have jurisdiction.

For [COMPANY NAME]                    Accepted by the Employee

_______________________               _______________________
[NAME], [DESIGNATION]                 [EMPLOYEE NAME]
Date: [DATE]                          Date: [DATE]

ANNEXURE A: REMUNERATION
[Show annual and monthly figures for basic pay, dearness allowance, retaining allowance, house rent allowance, each other allowance, employer provident fund contribution, gratuity provision and variable pay, with the criteria for variable pay.]

ANNEXURE B: EMPLOYEE'S PRE-EXISTING WORK
[List, or state "None".]

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This free template is provided by ClauseAudit as general information, not legal advice, and using it does not create an advocate-client relationship. Replace every [BRACKETED] placeholder. Stamp duty and registration requirements vary by State and are your responsibility. Have the final document reviewed by a qualified advocate before use.

When to use this template

You are hiring a salaried employee and want terms beyond a short appointment letter.
Your existing employment contracts still refer to repealed laws such as the Industrial Disputes Act, 1947 or the Payment of Gratuity Act, 1972.
You are taking on a fixed-term employee and need to record parity of benefits.
You are an employee and want to compare an employer's draft against a balanced baseline.

How to fill it in

Enter the Company's legal name, CIN and registered office, and the Employee's full name and address.
Fill in the designation, reporting line, joining date, place of work and whether the role is permanent or fixed-term.
Prepare Annexure A with each pay component shown separately, and check how much of total remuneration falls outside 'wages' under the Code on Wages, 2019.
Set notice periods, probation period, leave entitlements and the training cost threshold. Keep notice symmetric for both sides.
Ask the Employee to list pre-existing work in Annexure B before signing.
Check your State's stamp duty for an agreement of this kind and pay it, typically by e-stamping. Registration is not required.
Both parties sign and date, and the Employee keeps a signed copy along with the appointment letter.

Key clauses explained

Remuneration annexure (clause 5 and Annexure A): The Code on Wages, 2019 definition of wages affects provident fund, gratuity and bonus calculations. Listing each component separately makes the structure transparent and easier to check.
Fixed-term parity (clause 1.2): The Labour Codes require fixed-term employees to receive the same benefits as comparable permanent staff. Recording it avoids disputes about what was promised.
IP with a personal-work carve-out (clause 9): Copyright in work made in the course of employment usually belongs to the employer by law, but inventions need an assignment. The carve-out protects genuinely independent side projects.
Termination with a hearing (clause 11.3): Dismissal for misconduct without a chance to respond invites challenge. A written charge and an opportunity to reply is basic fairness and reduces litigation risk.
Exit timelines (clause 12): The two working day rule for wages on separation, and a deadline for the relieving letter, prevent the common practice of holding dues and documents hostage.
Non-solicitation instead of non-compete (clause 13): Post-employment non-competes are generally void under Section 27 of the Indian Contract Act, 1872. A narrow non-solicit of colleagues is more likely to be upheld.

Frequently asked questions

Is an employment agreement mandatory in India?

A detailed employment agreement is not mandatory, but the Occupational Safety, Health and Working Conditions Code, 2020 requires employers in covered establishments to issue appointment letters, with particulars prescribed by rules. Many employers issue a short appointment letter and a fuller employment agreement. Whatever you use, it should record designation, wages, category of employment and other prescribed particulars for your State.

Can an employer stop me from joining a competitor after I leave?

Generally not. Section 27 of the Indian Contract Act, 1872 makes agreements in restraint of trade void, and courts have generally refused to enforce post-employment non-competes. Restrictions during employment, confidentiality obligations and reasonable non-solicitation clauses stand on a different footing and are more likely to be enforced, depending on how they are worded and applied.

Is a training bond or employment bond enforceable?

A bond asking you to repay a fixed sum if you leave early is not enforced automatically. Under Section 74 of the Indian Contract Act, 1872 a court will generally award only reasonable compensation, not the full amount stated, and will look at actual training costs. A clause tied to documented costs and reducing over time, as in this template, is more likely to be upheld.

How long can probation last?

The Labour Codes do not set a single national maximum for probation in most employment. Six months is common, with one extension. Rules under the Codes, State shops and establishments laws, and any standing orders that apply may affect this. The fairer approach is a fixed period, one extension with reasons, and automatic confirmation if the employer does nothing.

Do we need to stamp an employment agreement?

Many States charge stamp duty on agreements of this kind, often as a small fixed amount under the general 'agreement' entry in the State stamp schedule. The rate and entry differ between States. Paying the correct duty, usually by e-stamping, avoids admissibility problems if the agreement is ever produced in court. Registration is not required.

Does the employer own code I write on weekends?

Not automatically. Under the Copyright Act, 1957 the employer is the first owner of work made in the course of employment. Work done in your own time, with your own equipment and unrelated to the employer's business, usually falls outside that, unless your contract assigns it. Clause 9.2 of this template keeps such work with the employee.

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This free template is general information about Indian law as at 2026-10-10, not legal advice, and using it does not create an advocate–client relationship. Replace every bracketed placeholder and have the final document reviewed by a qualified advocate before use.