Employment Contract

When working directly with a foreign employer as an independent contractor, you’re entering a very different arrangement than traditional permanent employment in India. Most Indian professionals have only worked for local companies or through GCCs (Global Capability Centers) where employment follows familiar patterns. This is different—and you need to understand how.

Contract vs. Permanent Employment: The Fundamental Difference

What You’re Used To: Permanent Employment

In traditional permanent employment in India:

  • Employer-employee relationship - You’re on the company’s payroll
  • Monthly salary - Fixed amount deposited to your account
  • TDS deducted - Tax deducted at source by employer
  • PF/ESI contributions - Employer handles provident fund, insurance
  • Benefits included - Leave, insurance, gratuity, bonuses
  • Job security - Notice period, severance, labor law protections
  • Legal protections - Covered under Indian labor laws

What You’re Entering: Contract-Based Employment

In contract-based arrangements with foreign employers:

  • Business-to-business relationship - You’re providing services, not an employee
  • Invoice-based payment - You send invoices, they pay against invoice
  • You handle taxes - No TDS, you’re responsible for tax filing
  • No statutory benefits - No PF, ESI, or mandatory benefits
  • No traditional employment benefits - You negotiate everything
  • Contract-defined relationship - Terms are what you agree in writing
  • Different legal framework - Not covered under typical labor laws

This is not employment—it’s a service contract. You’re essentially running your own business with one client.

Understanding Your Employment Contract

The employment contract is the single most important document in your relationship with the foreign employer. This document defines everything: your work, your pay, your terms, your obligations, and your protections.

Before you sign anything, read it carefully. Every word matters.

What’s in an Employment Contract?

A typical contract includes:

1. Parties to the Contract

  • Who you’re contracting with (the company)
  • Your details as the contractor/service provider

2. Scope of Work

  • What work you’ll be doing
  • Your role and responsibilities
  • Deliverables expected

3. Duration and Term

  • Contract duration - Fixed term (6 months, 1 year, etc.) or ongoing
  • Start date - When the contract begins
  • Renewal terms - How/if it renews automatically

4. Compensation

  • Payment amount - Your monthly or project-based fee
  • Payment currency - Usually USD, EUR, etc.
  • Payment schedule - When you get paid (monthly, bi-weekly, etc.)
  • Payment method - Wire transfer, PayPal, Wise, etc.

5. Probationary Period (if any)

  • Duration - Typically 1-3 months
  • Terms during probation - Can be shorter notice period, different terms
  • What happens after - Confirmation or termination

6. Working Hours and Availability

  • Expected hours or availability
  • Time zone overlap requirements
  • Flexibility terms

7. Termination Clauses

  • Notice period - How much notice either party must give
  • Termination conditions - When/how contract can be ended
  • Severance (if any) - Usually not included in contracts

8. Confidentiality and IP

  • Non-disclosure agreements
  • Intellectual property ownership (usually client owns all work product)
  • Non-compete clauses (read these carefully)

9. Other Terms

  • Dispute resolution
  • Governing law (which country’s laws apply)
  • Amendment procedures

Key Terms to Look For

When reviewing your contract, pay special attention to:

Duration:

  • Is this a fixed-term contract (ends on specific date)?
  • Is it ongoing/indefinite (continues until terminated)?
  • Does it auto-renew?

Probation:

  • Is there a probationary period?
  • What are the terms during probation?
  • What’s the notice period during/after probation?

Notice Period:

  • How much notice must you give to resign?
  • How much notice will you get if terminated?
  • Are there exceptions (immediate termination clauses)?

Payment Terms:

  • When do you get paid? (End of month? Bi-weekly?)
  • What’s the payment method?
  • Are there any holdbacks or delays?

Termination Conditions:

  • Under what conditions can they terminate you?
  • What happens to pending payments?
  • Any penalties for early termination?

Non-Compete/Restrictions:

  • Can you work for others simultaneously?
  • Are there restrictions after contract ends?
  • Geographic limitations?

Intellectual Property:

  • Who owns the work you create?
  • Can you use the work in your portfolio?

How to Read and Interpret the Contract

Take your time. This isn’t something to skim and sign.

Read carefully:

  1. Read the entire contract - Every section, every clause
  2. Look up terms you don’t understand - Legal language can be confusing
  3. Note anything unclear - Make a list of questions
  4. Check for consistency - Ensure terms don’t contradict each other
  5. Understand your obligations - Know what you’re committing to
  6. Understand your protections - Know what safeguards you have

Red flags to watch for:

  • Unclear or vague terms
  • One-sided clauses (all obligations on you, none on them)
  • Unreasonable restrictions (overly broad non-compete)
  • Immediate termination without cause
  • Unclear payment terms
  • No notice period for termination

Can You Negotiate?

Yes, you can negotiate—but understand your position.

Commonly negotiable terms:

  • Compensation - Always worth discussing
  • Notice period - Both sides should have reasonable notice
  • Working hours/flexibility - Especially if not clearly defined
  • Probation terms - Duration or conditions
  • Non-compete scope - If too broad or restrictive
  • IP rights - In rare cases, for personal projects

Less negotiable terms:

  • Core job responsibilities
  • Confidentiality requirements
  • Company policies on IP ownership
  • Payment schedules (often fixed by company)

How to negotiate:

  • Be professional and reasonable
  • Focus on mutual benefit, not just your gain
  • Prioritize what matters most to you
  • Be prepared to compromise
  • Get any agreed changes in writing

Don’t be afraid to ask questions or request clarifications. A good employer will appreciate your diligence.

Tax Implications: What Changes for You

This is critical: As a contractor, you are responsible for your own taxes. The foreign employer will not deduct TDS or handle any tax obligations for you.

Permanent Employment: Employer Handles Taxes

In permanent employment:

  • Employer deducts TDS (Tax Deducted at Source) every month
  • Employer files your tax information
  • You receive Form 16 at year-end
  • You mostly just file returns to claim refunds or pay balance

Contract Employment: You Handle Everything

As a contractor with a foreign employer:

  • No TDS deduction - You receive full payment
  • You must calculate tax - Based on your income
  • You must pay advance tax - Quarterly payments to Income Tax Dept
  • You must file returns - ITR forms (likely ITR-3 or ITR-4)
  • You may need GST registration - If income exceeds threshold (currently ₹20 lakhs/year)

Tax Responsibilities as a Contractor

What you need to do:

  1. Track all income - Every payment received
  2. Maintain records - Invoices, bank statements, contracts
  3. Calculate tax liability - Based on applicable tax slabs
  4. Pay advance tax quarterly - Due dates: June 15, Sep 15, Dec 15, Mar 15
  5. File annual returns - By July 31 (usually)
  6. Register for GST if needed - If annual income > ₹20 lakhs
  7. Keep business expenses documented - Deductible expenses reduce tax

Consider consulting a CA (Chartered Accountant) who specializes in freelance/contract taxation. The cost is worth avoiding mistakes.

Important Tax Notes

  • Foreign remittances are fully taxable as income in India
  • You can claim business expense deductions (internet, equipment, software, etc.)
  • Advance tax is mandatory if tax liability exceeds ₹10,000
  • Late payment attracts interest and penalties
  • GST on foreign clients may not apply (export of services) but consult a CA

Invoicing: How to Get Paid

If you’ve never created an invoice in your life, don’t worry—it’s simple. An invoice is just a formal request for payment.

What is an Invoice?

An invoice is a document that:

  • Lists the services you provided
  • States the amount owed
  • Provides payment details
  • Serves as a record for both parties

Think of it as a bill you send to the client at the end of the month (or billing period).

Basic Invoice Components

Every invoice should include:

Your Information:

  • Your name (or business name)
  • Address
  • Email and phone
  • PAN number
  • GST number (if registered)

Client Information:

  • Company name
  • Address
  • Contact person/email

Invoice Details:

  • Invoice number - Unique identifier (e.g., INV-001, INV-002, etc.)
  • Invoice date - When you’re sending it
  • Due date - When payment is expected (e.g., “Upon receipt” or “Net 30 days”)

Services Provided:

  • Description of work (e.g., “Software Development Services - January 2025”)
  • Period covered (e.g., “January 1-31, 2025”)
  • Quantity/hours (if applicable)
  • Rate and total amount

Payment Details:

  • Subtotal
  • Taxes (if applicable - usually not for foreign clients)
  • Total amount due
  • Currency (USD, EUR, etc.)

Payment Instructions:

  • Bank details for wire transfer
  • OR payment platform details (Wise, PayPal, etc.)

How to Create an Invoice

Option 1: Use Templates

  • Microsoft Word/Excel templates (free online)
  • Google Docs/Sheets invoice templates
  • Simple, professional, and good enough for most cases

Option 2: Use Invoicing Software

  • Zoho Invoice (free for small volumes)
  • Wave (free)
  • Invoice Ninja (free open-source)
  • FreshBooks, QuickBooks (paid, more features)

Option 3: Build Your Own

  • Simple document with all required information
  • Keep it professional and clear

Invoicing Process

Typical monthly process:

  1. End of month arrives (or end of billing period)
  2. Create invoice - For that month’s services
  3. Send invoice to employer - Usually via email to finance/accounting contact
  4. Employer processes invoice - Their internal approval process
  5. Payment received - Usually within 5-15 days (depends on their payment schedule)
  6. Record payment - Match invoice to payment received

Keep copies of all invoices - Both for your records and tax purposes.

Sample Invoice Structure

INVOICE

From:
[Your Name]
[Your Address]
[Email] | [Phone]
PAN: [Your PAN]

To:
[Company Name]
[Company Address]
[Contact Person]

Invoice Number: INV-2025-01
Invoice Date: January 31, 2025
Due Date: Upon Receipt

Description: Software Development Services
Period: January 1-31, 2025
Amount: $5,000 USD

Payment Details:
[Bank Name]
Account Number: [Your Account]
SWIFT/IFSC: [Code]

OR

Wise Account: [Email/Details]

Total Due: $5,000 USD

Keep it simple and professional. That’s all you need.

Payment Terms and Platform Role

Direct Employer-Contractor Relationship

Important to understand: When you work through this platform, you’re entering a direct relationship with the employer. The platform facilitates the connection, but:

  • Payment is between you and the employer - Direct transfer
  • Platform does not hold funds - No escrow service
  • Platform does not guarantee payment - We’re not a payment intermediary
  • You and employer manage the relationship - Terms, payments, disputes

What This Means for You

You are responsible for:

  • Invoicing the employer correctly
  • Tracking payments
  • Following up on late payments
  • Managing the payment relationship

The employer is responsible for:

  • Paying you according to contract terms
  • Timely processing of invoices
  • Adhering to agreed payment schedule

The platform is not responsible for:

  • Payment defaults
  • Payment delays
  • Dispute resolution between you and employer
  • Enforcing contract terms

Payment Expectations

Realistically:

  • Most employers pay on time - Payment defaults are rare
  • Professional companies honor contracts - They have reputations to maintain
  • International transfers take time - Usually 3-7 business days
  • Payment schedules vary - Some pay faster than others

If payment issues arise:

  • First, communicate directly with employer
  • Check if there are invoice/banking issues
  • Be professional and patient (some delays are process-related)
  • If problems persist, contact platform support to report the issue

Platform support can:

  • Log your concern and document the issue
  • Review the employer’s conduct
  • Take action if the employer violates platform policies (including potential removal from the platform)

Platform support cannot:

  • Force payment
  • Provide legal recourse
  • Compensate you for non-payment
  • Act as arbitrator in disputes

Your Protection

How to protect yourself:

  1. Have a written contract - Everything in writing
  2. Invoice promptly - Send invoices on time
  3. Keep records - All communications, invoices, payments
  4. Start with shorter payment terms - Monthly is common
  5. Flag issues early - Don’t wait if something seems wrong
  6. Do your due diligence - Research the employer before accepting
  7. Trust your instincts - If something feels wrong, it might be

Red flags before accepting an offer:

  • Vague or no contract
  • Requests to start work before contract is signed
  • Unclear payment terms
  • Requests for upfront payments from you
  • Unprofessional communication

Key Takeaways

Contract employment with foreign employers is different:

  • You’re a service provider, not an employee
  • You handle your own taxes
  • You invoice for payment
  • You have more flexibility but less security

Read and understand your contract:

  • Every clause matters
  • Ask questions before signing
  • Negotiate if needed
  • Get everything in writing

Manage taxes properly:

  • Track income and expenses
  • Pay advance tax quarterly
  • File returns on time
  • Consider hiring a CA

Invoice professionally:

  • Send invoices on time
  • Keep clear records
  • Follow up professionally

Understand payment terms:

  • Direct relationship with employer
  • Platform doesn’t guarantee payment
  • Most employers are reliable
  • Protect yourself with good practices

This is a new way of working for many Indian professionals. Take time to understand it, set yourself up properly, and approach it professionally. With the right knowledge and preparation, contract-based remote work with foreign employers can be incredibly rewarding—both professionally and financially.