Appointment letter format

The clauses an appointment letter needs

A usable appointment letter is not long, but it has to cover a defined set of things. Anything omitted is a gap that will be filled later by argument, by policy documents the employee has never seen, or by whichever side has better records.

The notice period clause

Notice is the clause most often argued about at exit, and most of the argument comes from three ambiguities that a well-drafted clause removes.

Is it reciprocal? A clause requiring three months from the employee and one week from the employer is one-sided and is read as such. State the same period both ways unless there is a reason not to.

Can notice be bought out, and by whom? Many employees assume they can pay salary in lieu and leave; many employers assume they can decline. The clause should say expressly whether payment in lieu is permitted and at whose option — and the two positions can differ, with the employer permitted to pay in lieu and the employee required to serve, provided that is what the contract actually says.

What is excluded? Misconduct is the usual exception, and it should say that termination without notice follows an enquiry appropriate to the circumstances rather than being automatic. That formulation is fairer, and it is far easier to defend.

Two related points. A notice period does not entitle an employer to withhold a relieving letter or a full-and-final settlement indefinitely as leverage. And an excessively long notice period may be challenged as unreasonable, particularly where it is coupled with a bond.

Probation — and the trap of letting it lapse

Probation exists so both sides can test the fit, and the clause should state the period, that confirmation depends on a satisfactory review, and that the employer may extend the probation by written notice.

The trap is what happens at the end. If the period passes and nothing is issued — no confirmation, no extension — the employee's status becomes genuinely ambiguous, and the ambiguity is resolved differently depending on what the letter said and how the parties behaved. Some contracts provide that the employee continues on probation until confirmed in writing; others are silent, and silence is where disputes live.

The practical discipline is simple and rarely followed: diarise the probation end date when the appointment letter is issued, and put something in writing on it. Confirmation, or an extension with a reason and a new date. Either is fine; nothing is not.

Confidentiality, intellectual property and restraint

Three clauses commonly sit together at the end of an appointment letter, and they are not equivalent.

A confidentiality obligation — not disclosing the employer's and its clients' information, during employment and afterwards — is ordinary, is enforceable, and should be accepted. It restrains disclosure, not employment.

An intellectual property clause providing that work created in the course of employment belongs to the employer is also ordinary. It is worth reading its scope: a clause claiming everything you create during the employment, including unrelated work in your own time, is broader than the usual formulation and can reasonably be narrowed.

A restraint on working for a competitor after the employment ends is a different matter. Section 27 of the Indian Contract Act, 1872 provides that an agreement restraining anyone from exercising a lawful profession, trade or business is void, subject to a narrow exception, and Indian courts have generally not enforced post-employment non-compete restrictions in the way that some other jurisdictions do. Restrictions operating during employment stand on a different footing. If you are asked to sign a post-employment non-compete, it is worth taking advice rather than assuming either that it is unenforceable or that it binds you.

• Confidentiality during and after employment: normal, and enforceable.
• Ownership of work created in the course of employment: normal; check the scope.
• Non-solicitation of clients or staff for a defined period: common, and treated variably.
• Post-employment non-compete: runs into Section 27 of the Contract Act; take advice.
• Any bond or service commitment: read it with the notice clause, since they interact.

Reading it as the employee

1. 1Check that the CTC and the break-up match what you were offered, and ask for the annexure if it is missing.
2. 2Read the notice clause: the period, whether it is reciprocal, and whether buy-out is permitted and at whose option.
3. 3Check the probation period and what confirmation depends on.
4. 4Check whether there is a bond, what it claims to cover, and whether it reduces over time.
5. 5Read the confidentiality and intellectual property clauses for scope, and query anything that reaches your own time.
6. 6Look for any post-employment restraint, and take advice before signing one.
7. 7Check the leave entitlement against your state's Shops and Establishments Act, and ask for the handbook it refers to.
8. 8Sign, and keep your copy. Scan it. This is the document you will want years later.

Mistakes employers make in appointment letters

1. 1A one-sided notice clause, which is read as unfair and undermines the rest of the document.
2. 2Silence on whether notice can be bought out, which guarantees an argument at exit.
3. 3Probation that neither confirms nor extends, leaving status ambiguous.
4. 4A CTC figure with no break-up annexure, so the employee cannot reconcile the first payslip.
5. 5Referring to a staff handbook the employee has never been given.
6. 6A blanket intellectual property clause covering everything the employee creates, including in their own time.
7. 7A post-employment non-compete drafted as though it were routine.
8. 8Not obtaining or retaining the employee's signed acceptance copy.

Worked examples