Offer letter and employment contract: red flags to look for

An offer letter is exciting. The employment contract that follows is where the details live: how much you actually take home, how you can leave and what you can do afterwards. Here are the red flags to check before you sign.

1. CTC is not your salary

Cost to company (CTC) includes the employer's provident fund contribution, gratuity, insurance and variable pay. Ask for the monthly in-hand figure and a full break-up. Check how much of the CTC is variable and what decides whether you get it.

2. Probation

A probation period of three to six months is normal. Watch for probation that can be extended without limit, or a much shorter notice period during probation that only the employer benefits from.

3. Notice period

Check the notice period for both sides. Ninety days is common in Indian tech companies. A red flag is a notice period that is long for you but short for the employer, or no option to pay instead of serving notice.

4. Training bonds

Some employers ask you to stay for a minimum time or pay a fixed sum if you leave early. Indian courts have generally enforced such bonds only for a reasonable amount linked to real training costs, not as a penalty. Check the amount, the period, and whether it reduces over time.

5. Non-compete after you leave

A clause stopping you from working for a competitor after you leave is generally unenforceable in India: Section 27 of the Indian Contract Act, 1872 makes agreements in restraint of trade void, with narrow exceptions. Restrictions during your employment, and rules against taking clients or confidential information, are treated differently and are often valid.

6. Intellectual property

It is normal for work you create for the employer to belong to the employer. Watch for clauses that also claim things you make in your own time, unrelated to your job.

7. Termination

Check whether the employer can end your job "without cause" with notice, what pay you get, and how "misconduct" is defined. A vague misconduct clause lets the employer avoid paying notice.

8. Deductions and recovery

Look for clauses allowing the employer to recover vague costs from your final settlement, such as "recruitment costs" or "equipment".

9. Location and transfer

Can you be transferred to another city or country without your agreement?

10. Missing documents

The offer letter often mentions an HR policy or code of conduct. Ask for a copy before you sign; you are agreeing to it.

What to do

Ask HR to explain anything unclear in writing, and ask for changes before you sign, not after you join. Upload your contract to April to see risky clauses marked in plain words, or ask April about a specific clause.

This article is general information, not legal advice.