Indian employment contract — must-have clauses for foreign employers

There is no single template that fits every Indian state and every employer. The contract must be calibrated to the state of work (because Shops & Establishments rules differ), the salary band (because Code on Wages 2019 floors apply), the role's IP profile, and the employer's home jurisdiction. What follows is the minimum content set.

The core clauses, in order

1. Parties — full legal name of the Indian employer (including CIN), employee's full name and address.
2. Effective date and joining date — separate fields. Effective date is when the contract binds; joining date is when employment begins.
3. Designation, function, reporting line — title, department, name and title of the person they report to.
4. Place of work — the city and state. If hybrid, the primary work-from-home address. This determines Shops Act and PT applicability.
5. Compensation breakdown — Basic, HRA, LTA, Special, employer PF, gratuity provision, perks. Basic must be ≥ 50% of CTC under Code on Wages 2019.
6. Probation — duration (typically 3-6 months), confirmation mechanism, notice during probation.
7. Notice period after confirmation — 30/60/90 days. Foreign companies typically use 60 for IC roles, 90 for senior. Buyout option.
8. Working hours — typically 9 hours including breaks, with overtime computation rules for non-exempt staff.
9. Leave entitlement — casual, sick, earned. Aligns with the company's leave policy and state laws.
10. Confidentiality — survives termination indefinitely for trade secrets, 2-5 years for other confidential info.
11. IP assignment — work-product belongs to the employer. Use the 'work-for-hire' construction PLUS an express present assignment of future IP (Indian Copyright Act doesn't have a strong work-for-hire default).
12. Non-solicitation — reasonable scope (12-24 months). Non-compete is largely unenforceable in India post-employment; don't try.
13. Dispute resolution — courts of the relevant Indian city (where employer is registered), governed by Indian law. International arbitration is possible but unusual for employment contracts.
14. PoSH compliance — express reference to the company's Prevention of Sexual Harassment Policy and Internal Committee.
15. At-will language — not enforceable in India. Termination requires notice or pay-in-lieu under industrial dispute law.

Why the IP-assignment clause matters more in India

Indian copyright law (Section 17 of the Copyright Act 1957) defaults ownership of literary works (which includes software) created in the course of employment to the employer — but only if a clear contract of employment exists. For consultants, the default is the creator (the consultant), not the engager.

This means two things for a foreign-owned subsidiary:

• Employees: the contract should explicitly assign all IP (present and future) to the employer, plus the employee waives moral rights to the extent permitted by law.
• Contractors: never rely on the employment default. Use an explicit IP assignment clause with consideration, signed before any IP is created.

Non-compete — the lost cause

Post-employment non-compete clauses are largely unenforceable in India under Section 27 of the Indian Contract Act, which makes any agreement in restraint of trade void. The Supreme Court has consistently held this since Niranjan Shankar Golikari (1967). Courts will not enforce a clause that bars your former engineer from working at a competitor.

What does work: non-solicitation (of your customers and your remaining employees), confidentiality (forever for trade secrets), and garden-leave-style notice periods with pay during notice. These remain enforceable when reasonable.

Termination — what the contract must say

Indian termination law is more protective of the employee than US at-will. The contract should clearly contemplate:

• Termination without cause — notice period × monthly salary in lieu, or notice served.
• Termination for cause — defined misconduct categories (theft, gross insubordination, conviction). No notice payable if for cause, but the cause must be documented through a disciplinary process.
• Termination during probation — typically 15 or 30 days notice on either side.
• Resignation — same notice period.
• Garden leave clause — employer's right to send the employee home during notice while still paying salary.

PoSH — required by law

Every Indian employer with 10+ employees must have a written PoSH policy, an Internal Committee, an annual training programme, and an annual report to the District Officer. The employment contract must reference the policy and confirm the employee has received a copy or acknowledges its existence.

Foreign-owned subsidiaries miss PoSH most often because there's no monthly filing to remind them. Then a complaint surfaces, and the situation is much harder to handle than it needed to be. Stand up the policy and committee before you hit 10 employees, not the day you do.