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The hiring of employees calls for several legal policies and agreements to be entered into between the employee and the employer:
- Appointment letter
- Employment agreement
- Consultancy agreement for consultants
- Employee policies like leave policy, POSH policy, IT policy, doe of conduct, and statutory benefit policies.
Some of these are mandated by law and some are recommended to prevent future complications. All these policies and agreements together form the employment package.
These policies can either cover full-time employees only or both full-time employees and consultants, freelancers, etc.
Employer is someone who hires or appoints an employee and pays them compensation. This can be an individual or a company.
Employee is someone who is appointed by an employer, directly or indirectly, to undertake certain specified work on their or their establishment’s behalf. This may include full-time employees, contractors, freelancers, etc. depending on the context.
Essential policies and agreements of an employment package
An appointment letter is sent by the employer to the employee once the offer is made by the employer and the same is accepted by the employee. It acts as a documental proof of the upcoming employment. It should include the summary of the employment like date of joining, role and salary. It is highly recommended as it formalizes the employer-employee relationship. Moreover, the new Labor Code which is likely to become effective soon, mandates every company to issue an appointment letter to the employees.
An employment agreement governs the relationship between an employer and an employee. It lays down the terms and conditions of the employment. It should include the duration of employment, compensation and other benefits for the employee, a non-compete clause, the role, responsibilities, and confidentiality obligation of the employee, and the termination and dispute resolution mechanism. It is also highly recommended as it brings clarity and structure. A well-drafted employment agreement can protect you from legal and financial liabilities and losses.
A consultant is an external expert appointed by the client for their services. A Consultancy Agreement primarily governs the relationship between a client and a consultant. It defines the consultant’s scope of work and other terms and conditions related to their service. It should include the consultant’s role, responsibilities, compensation, etc. It helps bring in the essential clarity and also helps define the business relationship. To know more about Consultancy Agreements, click here.
Leave policy gives an employee a clear idea of the number and nature of leaves they are entitled to take annually. It should include details of paid leaves, casual leaves, sick leaves, maternity leaves, paternity leaves, week offs, etc. In addition to the national holidays, each State has a separate mandatory leave entitlement and leave policy. It is important that your leave policy is compliant with the national as well as state labor laws.
The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 mandates every organization in India to have a POSH (Prevention of Sexual Harassment) Policy in place. It should clearly lay down the steps and processes an organization would take to implement POSH at the workplace. Your employment contract should reflect the organization’s commitment to a safe workplace. It should lay down the consequences of breach of POSH policy.
An Information Technology (IT) policy defines how you as an employer develop, implement and secure your IT resources. It should include the purpose, rules, regulations, security policies, and guidelines for proper use and maintenance of your IT resources to ensure their proper and ethical use. It assures proper health, safety, and security of your data, products, services as well as the human resources using them.
Why do you need an employment package?
- Legal compliance
The policies and agreements together will ensure that you are compliant with all relevant laws, rules, and regulations. This means that you are safe from all non-compliance penalties.
- Increase in employee productivity
Having all policies and agreements in place helps to lay down a foundation for employee management. It also brings in more transparency and thus helps increase trust and confidence amongst the employees. A safe and structured workplace means optimal employee productivity.
- Early resolution of disputes
These policies and agreements together lay down a mechanism for internal dispute resolution. This ensures that employees are comfortable bringing up their issues and also often helps resolve disputes before huge escalation. This ensures that your goodwill stays intact.
- Protection from future liabilities
It would mean that the employees are aware of their rights, responsibilities, and duties. Additionally, it would also reflect good practice and commitment from your end. This will protect you from future legal and financial liabilities.
Code of conduct policy
It is recommended that every company has a code of conduct policy in place. It is a guide to help employees live up to the company’s values, vision, ethics, and mission. It should include policies like equal rights, dress code, safe and enabling work environment, etc. Under the new Labor Code which is likely to become effective soon, employees and employers may be penalized in case of failure to maintain and follow good health and safety practices. The code of conduct policy will help employees ensure the highest standards of corporate behavior.
Statutory benefit policies
Employee benefits like gratuity, provident fund, and maternity benefits are statutory rights of employees. Every company is mandated under the labor laws to have clear policies for these statutory benefits. You may either have independent policies or may include them in the employment agreement. The code on social security, as a part of the new Labor Code which is likely to become effective soon, will be introducing new categories of workers who would be eligible for these benefits. Having a well-drafted policy for these statutory benefits will help you ensure compliance with the relevant laws and to prevent future liabilities.
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Are you one of these?
- An employer
- A student about to intern in a company
- A freelancer, contractor, or consultant
- An employee
- A company hiring employees
Do you relate to any of these statements?
- As an employer has a unique business model
- Has requirements that are peculiar to your business
- Wishes to protect your trade secrets
- As an employee wishes to have clear expectation setting and regular payments and benefits
- Wants to avoid future losses and liabilities