A Brief Overview Of Employment Contract Management
Managing employee contracts is a massive operational challenge for organizations. The biggest issue with employee contract management is rolling out employment contracts complying with legal and organizational policies.
In a traditional workflow, the internalization of employees into the organization causes slow turnover and decreases productivity in HR verticals.
AI-powered contract management tools can streamline the documentation workflow for employment contracts.
The HR and management teams can complete tasks faster and more efficiently while ensuring compliance by executing and managing employee contracts with smart CLM.
What Is An Employment Contract?
An employment contract is a signed agreement between an employee and an employer or labor union regarding the terms & conditions, rights, responsibilities of the employment, and obligations of both parties during the work period.
A proper contract of employment should be legally binding under the regulatory framework of labor or employment law. The employment law mediates employment relationships between workers, employing entities, trade unions, and the government.
The Elements Of An Employment Contract
A signed employment contract has certain elements that depend on the nature of the contract.
Setting minimum standards concerning critical elements of the employment relationship, such as wages, hours, and holidays, and establishing a range of rights in respected areas, such as discrimination and equal pay, is the main objective of an employment contract.
- Commencement of employment – An employment agreement contract should mention the employee’s joining date in the organization.
- Duration of employment – A job contract specifies the nature and tenure of the employment. The duration varies from contract to contract. It can be a continuous period, a specific term, or the possibility of extending that period.
- Job Title and Description – A valid contract of employment must contain the details of the employee’s job title and description, various duties, and general job responsibilities and tasks in the job profile.
- Employer’s Policies & Regulations – Employment contracts state the employer’s policies and administrative regulations. It covers the working relationship between the employee and the company.
- Work Schedule – The contract for work should mention working days and hours in a week with shift timing with allotted leaves and holidays.
- Employee Compensation & Benefits – Contracts must mention the salary, commission, and employee benefits like health insurance, pension benefits, and life insurance, including vacation time, paid time off, sick days, expense accounts, and conveyance in kind or cash.
- Confidentiality – The employee must adhere to the company’s regulations by signing a non-disclosure agreement which is part of the employment contract. A non-disclosure clause in the employment agreement restricts the employees from disclosing any internal issues to a third party.
- Non-compete agreement – The employee must sign the non-compete agreement or non-compete clause (NCC). Such an agreement states that upon leaving the company, the employee will not enter jobs that will put them in competition with the company.
Types Of Employment Contracts
- Permanent Employment – Permanent employment is a contract for an indefinite period with benefits like subsidized health care, paid vacations, holidays, sick leave, or contributions.
- Fixed Term – The employee and employer relationship is based on fixed terms and conditions for a definite period of time set in advance in a fixed-term contract.
- Part-time – Part-time contracts are for jobs with fewer hours per week than a full-time job.
- Zero Hours Contracts – Zero hours employment contracts are usually for jobs that happen on a sporadic basis when an employer hasn’t defined the amount of work.
- Internship Employment Contracts – The nature of internship employment depends on the job profile as it can be considered a volunteer, worker, or employee.
- Apprentice Employment – An apprentice agreement contains details of the skills, trade, or occupation the apprentice is being trained for and the amount of training the apprentice will receive.
Why Do Businesses Require Robust Employment Contracts
A legally binding employment contract benefits both employer and employee as it ensures legal support, safeguards legal rights, and tends to both parties’ common interests.
A robust workers’ agreement contract boosts organizational morale and values by strengthening employment relationships under statutory regulation.
Strong Legal Framework – An employment agreement can safeguard the proprietary information being leaked or stolen by an employee by including confidentiality clauses. Employers can ensure legal protection and charge criminal proceedings if any employee breaches the agreement. The legal implications and penalties secure the contractual obligations of both parties.
Retention Rate – Retaining skilled employees is difficult due to high competition in the business industry. A strong contract secures the critical workforce of the employer, providing attractive packages and assuring the employees of a good working environment for the long run.
Job Security – An employment agreement guarantees employees’ job security and labor certainty to the employer. It ensures employees’ stability, performance, and accountability with a clear set of purposes and continuation in the organization for the maximum period.
Challenges In Managing Employment Contracts
The terms of the employment contract legally bind employees and employers. But there are several challenges when contract breaches occur, or the employer’s actions are invalid or opposed to the stipulations of the contract clauses.
- Contract Breaches – This challenge arises when any party violates the stipulated clauses of the contract and fails to perform contractual obligations. Contract breaches can be related to many issues, such as wages, relevant breaks, working hours, delivered work, workplace behavior, etc.
- Invalid Terms – Many contracts contain invalid terms when the employee is unaware of legal terms or needs help understanding the negative aspects of the work agreement, such as demotion or termination. The employee agreement is made valid by including legitimate clauses, and businesses can question employment anytime.
- Equivocal Negotiations – Certain negotiations can not be altered without further renegotiations, and both parties should adhere to these conditions. Poorly constructed agreements with vague or broad clauses containing missing information cause a lack of clarity and transparency.
- Non-relevance – The employment agreement can only be void if it is verbally formed or matches the details. The job title and description must match the contract to avoid non-relevant agreements.
- Enforceability of The Court – There is a limit to how far the courts can legitimately interfere with the expressed terms of the contract in the absence of legislation conferring that power. The agreement must be in written format and within the time limit for legal enforceability to provide legal evidence of the contract.
Smart Employee Contract Management – Benefits For Employers
Employers and employees can execute legally valid employment contracts with extended legal support without worrying about contractual obligations and legal enforceability. Smart CLM tool offers enterprise-grade contract management solutions that can solve the challenges of employment agreements.
Contractual Documentation – With the help of an AI-powered tool, the smart dashboard provides a superior contract management software system that helps the employer instantly draft the contracts from scratch from the template library. Both sides can negotiate the terms and conditions and monitor the activity status on the smart platform, and address any breach of contract issues. The CLM software streamlines bulk contractual employment documentation with a self-onboarding facility.
Legal Support – All contracts executed under our smart contract lifecycle management software have full legal support and are backed up by legal teams. The clauses of contracts are formed under the legal framework, certified by ISO, and compliant with GDPR regulations.
Contractual Obligations – The smart CLM tool provides features like remote tracking and audit trails that help to achieve contractual obligations without missing a single milestone. The robust drafting of contract and agreement, contract status monitoring offers transparency and traceability that nurtures client relationships and smooth contract execution.
Online Negotiations – The critical stage in any contract execution is negotiation and collaboration. With the online remote negotiation facility, both parties, especially the employee, have the convenience and freedom of negotiating the terms without delay and physical meeting arrangements. The HR department can quickly execute more employment contracts boosting productivity and enabling a better workforce.
Instant E-Signing – After mutual agreement, the parties can sign the employment contract online with the help of the eSigning facility integrated with the CLM software.
How To Manage Employee Contracts Online – CLM Workflow
The HR department can draft and execute employment contracts following a few simple steps leading to digital onboarding and successful retention of the recruits to potential employees.
Contract Request – Contract Request is the initial stage of the contract lifecycle management process. In this phase, the employee details are fetched after selection and securing the job post. Information regarding employees, such as demographic data, job title and description, job responsibilities, nature of employment, remuneration, benefits, working hours, and terms & conditions of the contract, is acquired to commence the employment agreement creation after verifying all data.
Contract Creation – In this stage, the employer composes the contract. HR associates can instantly create employment contracts with the templates available in the template library or simply upload the contract in their format. The contract must state its content, intent, terms & conditions, non-liability clauses, non-compete clauses, non-disclosure agreements, confidentiality, compliance regulations, dispute resolution clauses, consequential organizational policies and terms, use of signatures, and designated parties.
Contract Review – In this stage, the employer can review the contract in case of error or remodification with unique features like clause formatting, highlighting certain sections that enable locking, and adding comments to edit the document. HR managers can monitor contract activities through the activity tracker and the data history of the contract.
Contract Approval – After contract creation, both parties are invited to approve the contract for collaboration and negotiation.
Negotiation – The contract is shared with the employee to negotiate & establish the terms and conditions of the agreement. The employee can see all terms and conditions mentioned in the employment agreement. The employee can assert any disagreement and suggest altering the contract clauses. After the necessary negotiation cycles, the two parties have a mutual understanding, and signer details are added, drawing closure to the negotiation process.
E-Stamping & E-Signing – On our digital platform, clients can pay stamp duty using the digital wallet facility, adding the required stamping details to make the document legally valid. After eStamping is processed, the mode of signature and signer details are added as per the Aadhaar details. Smart CLM tool offers options to accelerate the process by providing a time limit for signatures.
After receiving the invitations through emails, the signers are directed to the contract signing page, i.e., the NSDL portal. The signers are verified through OTP-based Aadhaar authentication, and the signatures are affixed to the employment contract concluding the contract execution.
Central Repository – A cloud-based centralized digital repository is integral to the contract lifecycle management software. Contracts are stored in a highly secured central repository maintaining transparency and employee details confidentiality and managed with regulations under GDPR compliance. With a central repository, the agreements and user databases are safe without the fear of physical paper loss or physical damage.
Audit Trail – With the facility of an audit trail, the smart CLM software can easily regulate and track any activity on the intelligent platform. The contract lifecycle management system helps the HR team supervise employee profiles and accounts, profile maintenance, employee onboarding, and legitimate employee verification.
Manage Employment Contracts Efficiently With SignDesk’s CLM Tool
SignDesk is a SaaS-based digital solution provider offering smart contract management and workflow automation. SignDesk’s contract lifecycle management software “contr.act” can help automate employment contract management from draft to renewal.
Contract lifecycle management tools help create and manage all your contracts in a single, smart platform using template libraries, digital negotiations, central storage & real-time alerts for renewal.
SignDesk CLM also offers fast and secure eStamping and eSigning to execute contracts within minutes under all national and international regulatory frameworks, with the added advantage of customizable contract templates. Additionally, SignDesk provides contract manufacturing software to streamline and automate the manufacturing contract process.
Get in touch for a quick demo of how smart CLM automates employment contracts.
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