Employment Agreement: Definition
- Employment Agreement is a Formal agreement between employer and employee, where employer offers a job to employee and provide him official document which will outline their standard terms and conditions concerning duties, place of work, contracted hours, compensation, position and statutory entitlements of the employees.
Start-ups and Employment Agreement
- Dictionary provides a very brief meaning of the term Start-up as “a new business” or “a newly established business” but in actual it is a very comprehensive term.Start-ups are usually new, small and innovative companies which are founded just by bunch of people or individuals known as founders. Start-ups are usually constituted to offer a unique, new or innovative products or services which according to them may turn into a revolution in future.
- Recently Ministry of Commerce and Industry via a notification furnishes the definition of Star-up as :
- Will be considered as a Start-up up to five years from the date of incorporation.
- If the turnover of the start-up does not exceed 25crores in the last 5 financial years.
- It is working towards innovation, development, deployment, and commercialization of new products, processes, or services driven by technology or intellectual property.
- Start-ups are usually set-up to make innovative and revolutionary products and a service that’s why their expenses sometime exceed their profit or revenue as they work on developing a new product or services which requires time, patience and money. While concentrating on all this serious and worthy issues they usually Neglects issues like Agreement between founders and employees.
- The key feature in the working of Start-ups is Uncertainty itself. Start-ups are mostly uncertain in nature there are equal possibilities that a start-up will develop a revolutionary wave in business world like Flipkart, Oyo, Lenskart, Paytm etc. or may fail miserably like Watchkart, Langhar etc. The reason of Uncertainty plays a vital role in neglecting the employment agreement by the start-ups. Start-ups are never sure that in which way the start-up will turn the tables in future so they just hire the employees in return of low wages and also sometimes hire them on intern basis or promise to pay if they shows their credibility and need in the development of the start-up.
- Informal nature of start-up is also a major reason for neglecting the formalities like Employment Agreement, Founders Agreement, and Incorporation etc. They are more involved in the process related to testing and developing and to launch their product or service in market in proper manner that they consider employees as wage labor and Employment Agreement as trivial issue only.
- Less Profit or less Revenue also plays a significant role in neglect of essential Legal formalities or hiring a qualified Lawyer or CA. It’s true that they charge a huge chunk of money but they are qualified enough to take care of the Start-up in solving legal troubles or fulfilling the legal formalities like Employment Agreement or Incorporation.
Consequences if Employment Agreements are not furnished
- Neglecting the Employment Agreement may raise troubles for start-up in absence of Non-disclosing agreement which assures confidentiality and Non-compete agreement which prohibits an employee to work in certain demographic area or business field for a certain time if he resigns without any reasonable reason or fired by start-up itself.
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