Nature of Employment Contract


In simple terms a contract of employment is the agreement between employer and employee which governs the relationship between both parties. Employment contracts are formulated in the same manner as any other contract. The nature of an employment contract can be explained in the following chronology.

1.Offer and Acceptance:

¨a vacant position/job, constituted as the offer,

¨the acceptance is by the workman, consideration being the work to be done and salary/remuneration to be received (although consideration does not necessarily have to be in a monetary form) and intention to be legally bound.

¨an employee who makes an individual approach to an employer in relation to a job will be considered to be making an invitation to make an offer, rather than an actual offer. It must be appreciated that both offer and acceptance may be express or implied, oral or in writing. It may be inferred from the conduct of the parties.



¨However, it must be born in mind that failure to provide a written contract of employment results in a lack of clarity between the parties as neither party is aware of the precise extent of their respective rights, duties and obligations. The modern day, insisting on written contracts are a prudent action that can be taken by parties to employment.

  1. Terms of a contract :

¨The contract should provide for the basic contention of remuneration and such other terms that both the employer and employee should abide by.

¨These terms can be; express terms which are specifically mentioned, either in writing or orally and have been agreed by both employer and employee; implied terms which are not set out in writing or agreed orally but such conduct from all parties are implied; statutory terms which are imposed, varied or regulated by law and incorporated terms.

  1. Clauses of exclusivity:

It is practically and physically impossible for a person to hold several places of employment/jobs. However, there are certain professions where a person can provide their labour to several employers. In order to provide labour in such a manner, the contract of employment must include  clauses of exclusivity.

  1. Restraint of trade Clauses (Self-control clauses):

¨The earliest attitude towards restraint of trade clauses was to avoid all contracts which would prohibit or restrain any to use a lawful trade at any time or place.

¨However, the most common forms of restrictive covenants are those which prohibit, for a period of time, an employee whose employment has terminated, from:

(i) setting up in business in competition with the employer;

(ii) working for a competitor of the employer;

(iii) interfering with the suppliers of, or supplies to, the employer;

(iv) canvassing, enticing or soliciting the customers of the employer;

(v) dealing with the customers of the employer;

(vi) canvassing, enticing, inducing, soliciting or poaching the employees of the employer; and

(vii) disclosing or exploiting the confidential information or trade secrets of the employer.

Content of employment contract:

While recruiting worker or employee by the employer, the following matters to be mentioned in the employment contract .

1.Name of the Parties:
The employer’s organization details and the employee’s full name and address.

  1. Start Date:

This is important as it also includes a brief statement to say that employment with a previous employer does not count towards the various rights that are gained by employees after one and two years of service. In other words the employee starts again from zero with the new employer.

  1. Job Title and Description:

This usually follows the job title and description specified in any recruitment advertisement and subsequent offer letter.

  1. Place of Work:

Allows the employer to specify the location where the employee will work. However, it also allows for the employer to specify any other location in the future.

  1. Hours of Work:

The employee’s hours are specified within the contract, however the employee also agrees to work additional hours if the employer reasonably requests it. However, the hours cannot exceed the 48-hour per week as specified by the working time regulation.

  1. Probationary Period:

The employer can specify a trial period for the employee with the option of a short notice period at the end of the trial, if the employee does not fulfill expectations. The employer can also extend the trial period.

  1. Salary:

This details the employee’s gross salary before tax, national insurance and any deductions. It also specifies when payment is made.

  1. Assessments:

The employer can state when the employee will receive their first work assessment and the timing of all subsequent regular assessments, for example every 12 months.

  1. Deductions:

This clause detail all the circumstances in which the employer can make deductions from the employee’s salary.

  1. Expenses:

The employer can agree with the employee, which work-related expenses will be covered and when the employee will be reimbursed. However to prevent errors and possible fraud the clause makes it clear that proof of payment is required.

  1. Holidays:

¨This clause specifies when the holiday year will run from. This is important as the employer may wish to prevent employees taking busy work periods off, for example Dashai, Tihar, public holidays and other holidays entitled as per the laws and regulations so concerned.

¨This also includes further details regarding rolling-over holidays into the next year, restrictions on holidays where the employee has already given notice and on termination the pro-rata payment in lieu of any unused holiday entitlement.

  1. Sickness & Disability:

Absence through sickness is a major cost burden on employers. This clause states by what time the employee must inform the employer that they will be unable to attend work. The clause also states when a doctor’s certificate is required and whether the employee will receive statutory or contractual sick pay.

  1. Pension:

This clause states the pension provision – company pension scheme, a stakeholder pension scheme or whether the employment comes without a pension provision.

  1. Notice:

The notice period to be given by either the employer or the employee. However, this clause also provides a detailed list of actions that constitute gross misconduct allowing the employer to dismiss without giving notice.

  1. Restrictive Covenants:

¨This is only included within the Compact Law Long Employment Contracts. It protects all confidential and commercial information belonging to the employer. employer.

¨Prevents an employee from setting up a competing business whilst still employed. Also prevents an employee from competing for a set period of time and within a defined geographical area once they have left the employer.

¨the clause states that any breaches will entitle the employer to seek legal redress, including damages for any loss.

  1. Grievance and Disciplinary Procedure:

This refers to the detailed separate Grievance and Disciplinary Policy that comes free with each Compact Law Employment Contract.

  1. Retirement:

Refers to a separate  Retirement Policy – which every organization should have in place .

  1. Severability:

This standard paragraph states that each paragraph, sub-paragraph or clause is independent of each other, so if one is invalid or does not apply to the employee the rest of the contract remains valid.

  1. Prior Agreements:

Another standard paragraph, stating the contract contains all the terms agreed between the employer and the employee and that no previous agreement (written or verbal) counts.

  1. Jurisdiction:

Confirms the contract of employment comes under the jurisdiction of the English, Nepali, Indian courts etc.

  1. Particulars of Employment:

Under Section 1 of the Employment Rights Act 1996 all employee contracts must set out the main terms of the contract in a separate schedule. This is so that the employee (and the employer) can easily refer to this schedule when they wish to remind themselves of the main terms.

  1. Severability:

This standard paragraph states that each paragraph, sub-paragraph or clause is independent of each other, so if one is invalid or does not apply to the employee the rest of the contract remains valid.

  1. Prior Agreements:

Another standard paragraph, stating the contract contains all the terms agreed between the employer and the employee and that no previous agreement (written or verbal) counts.

  1. Jurisdiction:

Confirms the contract of employment comes under the jurisdiction of the English, Nepali, Indian courts etc.

  1. Particulars of Employment:

Under Section 1 of the Employment Rights Act 1996 all employee contracts must set out the main terms of the contract in a separate schedule. This is so that the employee (and the employer) can easily refer to this schedule when they wish to remind themselves of the main terms.