Employment Agreement Checklist: Important Clauses to Review Before Signing

You have the offer letter, the joining date is close, and HR sends a multi-page agreement to sign by evening. Most of us scroll to the salary figure and sign. But what happens if the notice period is longer than you expected, or a clause stops you from joining another company after you leave?

Knowing how employment agreements are drafted can help you understand the terms you are agreeing to and identify potential concerns. Through its Contract Drafting Advanced Program, PW Legal Skills covers agreement drafting, contract review, redlining and different types of legal documents, helping you develop practical skills for examining contractual terms. 

Employment Agreement Checklist Overview

An employment agreement contains several clauses that define your role, compensation, benefits and obligations. Understanding what each one covers can help you review the important terms before signing. 

What Should You Know About Your Legal Rights Before Reading the Agreement?

Does everything in your agreement come from the contract? No. Some of your entitlements come from law, and some are agreed between you and your employer. Knowing the difference helps you understand what you can negotiate and what you should simply verify.

The four Labour Codes, namely the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020, came into effect from 21 November 2025. Under them:

• Appointment Letters: Employers are now required to issue appointment letters to employees with details such as the role, responsibilities and applicable benefits.

• Wages: Workers have a statutory right to minimum wages and timely payment of wages.

• Social Security: Coverage under schemes such as the Employees' Provident Fund Organisation (EPFO) and the Employees' State Insurance Corporation (ESIC) applies when the applicable conditions are met.

• Working Conditions: The Codes also address workplace health, safety and working conditions.

Whether a particular provision applies to you depends on the relevant Code, your category of employee, the type of establishment and the applicable rules. Salary structure, annual increments and many other terms are largely left to the contract, which is why reading it carefully matters.

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Which Clauses Should You Review Before Signing?

Which parts of the agreement need the most attention? Here are twelve clauses to check, along with the questions you can ask.

1. Job Role and Responsibilities

Check your designation, job description, reporting manager and place of work. Are the duties clearly defined, or is the wording so broad that the employer can assign almost anything?

2. Salary and CTC Structure

Do not look only at the total CTC. Check the breakup of basic pay, HRA, allowances and variable pay, and whether the conditions for bonus or incentives are clearly stated. Under the Labour Codes, the wages component should ordinarily be at least 50% of total remuneration. If it is lower, wages are treated as 50% for calculating benefits such as gratuity, retrenchment compensation and certain social security contributions. House rent allowance, conveyance allowance and commissions are excluded from "wages", so the breakup can affect your benefits.

3. Probation and Confirmation

Check how long probation lasts, whether the employer can extend it and how confirmation happens. An open-ended extension without clear conditions is worth questioning.

4. Notice Period and Termination

Is the notice period the same for both you and the employer? Check whether the employer can pay salary in place of notice, and what the grounds for termination are. For workers with at least 240 days of service, termination for reasons other than misconduct generally carries a right to one month's notice (or pay in lieu) and retrenchment compensation of 15 days' wages for every completed year of service. Wages due on termination must be paid within two working days of leaving. Whether you fall under the category of a worker or a managerial employee affects these rights.

5. Working Hours, Leave and Holidays

Normal working hours are generally eight to nine hours a day and 48 hours a week, with overtime paid at twice the ordinary wages beyond those limits. Most of these protections apply to workers rather than managerial employees, whose hours are largely governed by the contract. Leave entitlements depend on the type of establishment and state law, so check that the agreement is consistent with them.

6. PF, ESI, Gratuity and Other Benefits

Check whether provident fund and ESI deductions are explained and whether the salary structure supports them. Gratuity for permanent employees continues to require five years of continuous service, while fixed-term employees who complete one year of continuous service are entitled to pro-rated gratuity when the contract ends.

7. Confidentiality and Non-Disclosure

Check what information is treated as confidential and whether the obligation continues after you leave. Confidentiality obligations commonly continue after employment ends, and a breach can lead to liability under contract law.

8. Intellectual Property Rights

Make sure the scope of ownership is clearly defined and limited to work created during your employment.

9. Non-Compete and Non-Solicitation

Section 27 of the Indian Contract Act, 1872 makes agreements that restrain a person from exercising a lawful profession, trade or business void to that extent. A post-employment non-compete is therefore generally treated as void, while clauses on confidentiality and non-solicitation of employees or customers have been enforced by courts on a case-by-case basis.

10. Employment Bond and Training Cost Recovery

If there is a minimum service period, check how much you would have to pay if you leave early and how that amount is calculated. Under Sections 73 and 74 of the Indian Contract Act, compensation is generally limited to the genuine loss suffered, so the recovery amount should be reasonable and explained.

11. Dispute Resolution and Jurisdiction

Check how disputes will be handled and which law and courts apply. Arbitration clauses are uncommon in ordinary employment agreements and are usually found in senior executive and founder agreements. If one is included, the agreement should be adequately stamped.

12. Company Policies and Amendments

Does the agreement bring in separate HR policies, and can the employer change important terms on its own? Ask for the policies referred to in the agreement, since they may form part of your terms.

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Which Clauses May Look Normal but Create Problems Later?

Employment agreements may contain clauses that seem standard but can affect your salary, job security and future career options. Pay attention to the following terms before signing: 

• Variable Pay Without Clear Conditions: A line saying bonus is "at the company's discretion" gives you little certainty about what you will actually receive.

• Open-Ended Probation: If probation can be extended repeatedly, your confirmation may keep getting delayed.

• One-Sided Notice: A longer notice period for you than for the employer deserves a question to HR.

• Broad Restriction Clauses: A clause that stops you from working with any competitor for years may not be enforceable, but signing it without questions can still cause stress later.

• Unexplained Bond Amounts: A round-figure recovery amount with no link to actual training cost is worth challenging.

• Unilateral Changes: A clause that lets the employer change salary, role or location at any time can affect terms you relied on when accepting the job.

How Can Contract Drafting Knowledge Help You Review an Employment Agreement?

Understanding contract drafting helps you identify what different clauses mean, how they assign responsibilities and where unclear terms may create problems. Here are three ways this knowledge can help:

1. Understand Contract Clauses

Knowing how clauses are written helps you understand your rights and obligations. For example, you can distinguish between confidentiality and non-compete clauses and understand how each affects your employment.

2. Identify Unclear Terms and Obligations

Drafting knowledge helps you recognise unclear wording, missing details and clauses that may create confusion about salary, responsibilities or exit conditions.

3. Ask the Right Questions Before Signing

An employment agreement covers your salary, responsibilities, benefits, restrictions and exit conditions. Understanding its structure helps you check each clause, distinguish statutory rights from agreed terms and ask HR for clarification where needed.

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If you want to build a foundation in Contract Drafting, the PW Contract Drafting Beginner’s Program covers contract structure, commercial and employment contracts, contract review and practical drafting through 4 practice-oriented modules. 

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Once you are comfortable with the basics, the PW Contract Drafting Advanced Program takes you through eight advanced modules covering different areas of legal documentation. 

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An employment agreement sets out your salary, responsibilities, benefits, restrictions and exit conditions, so it deserves more than a quick read before you sign. Check each clause against the checklist, separate your statutory rights from agreed terms and ask HR to clarify anything that is unclear. Understanding how contracts are written can make this review easier. PW Legal Skills can help you build the drafting and contract review skills you need to read agreements with more confidence.