Soon, your job contract will have a tariff clause

Not just that. “Some of the [other] potential changes will include renegotiating senior management remuneration, increased outsourcing and framing of voluntary retirement schemes, more fixed-term employment contracts and redundancies at the mid-management level," said Sowmya Kumar, partner at Cyril Amarchand Mangaldas who looks at employment practice for the law firm.

Companies will review clauses, especially for remote workers, as it is “possible that employee disputes on unfair terminations/payment disputes will increase", Kumar said.

Donald Trump’s sweeping tariffs and a 90-day pause have heralded unprecedented volatility for global trade and markets. US' steep levy on China threatens to flood other markets with cheap exports. The uncertainty affects sectors from steel and textiles to fisheries, stoking fears of a prolonged disruption. All this comes on top of Russia’s prolonged invasion of Ukraine and simmering tensions in the Middle East as Israel continues to bomb Gaza in response to the 2023 Hamas attack, killing thousands of Palestinians.

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Firms will now look at tariff disruptions included in 'force majeure clauses' for employee exits, according to Anshul Prakash, partner, employment labour and benefits for Khaitan & Co, told Mint. "We expect organisations to update the force majeure clauses in employee engagement documents to expressly include war, trade embargoes, sanctions, and tariff-related disruptions as valid reasons for contract termination."

Argus Partners (Solicitors & Advocates) has seen contract terms for senior-level employees and project-driven roles change. “We are seeing more companies opt for fixed-term contracts—in some cases to manage cost exposure, in others because companies just want the flexibility to reassess headcount every six or 12 months," said Arka Majumdar, a partner who looks at labour and employment, and corporate practice at the law firm.

Companies were already including clauses on natural disasters and pandemics, besides temporary terms allowing employers to reduce salaries and delay appraisals, according to partners at law firms. And ‘force majeure’--for uncontrollable events--was already built into commercial contracts. These are now finding their way into employment contracts on a much larger scale.

“With the rise of economic volatility, we may see more dynamic compensation packages where bonuses, salary increases or stock options are tied to external factors such as market stability or supply-chain continuity or inflation, and not just on company and individual performance," said Prakash of Khaitan and Co.

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The changes come as the appraisal season has started, and companies are expected to offer slimmer hikes and fewer promotions in 2025. India’s largest software services provider Tata Consultancy Services Ltd has already signalled delayed wage hikes for its employees in FY26 because of demand uncertainty, sparked by the global trade war.

Consulting firm Deloitte estimates a 25% drop in the number of promotions in 2025, while Aon predicts that salaries across industries will rise an average 9.2% this year versus 9.3% in 2024.

"So far, most of our clients are in a wait-and-watch mode regarding the tariff-related disruptions but have certainly begun doing an assessment of short- and long-term impact on business, profitability and sustainability of operations," said Atul Gupta, partner-labour and employment law practice, Trilegal.

The law firm has seen most of its clients prefer more flexibility in employment contracts. "We typically see the following reactions – hiring pauses, budget limitations impacting hikes and bonuses, higher level of hiring in fixed term/project-based roles since those agreements expire automatically without the need to pay for notice or severance, longer probation periods...," said Gupta.

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In the last couple of years, India Inc. has become wary of employees shifting loyalties and weaved in service bonds that included penalties worth six months to one year’s salary and benefit costs if the employee exits before a stipulated period. In some cases, special contracts were drawn in to protect the firm's intellectual property rights.

"Employers may increasingly reinforce termination rights and post-termination protections to safeguard proprietary information and business interests after separation," said Gerald Manoharan, general corporate partner at JSA Advocates & Solicitors. “To maintain greater flexibility in workforce decisions, wider use of longer probationary periods may also be considered--allowing employers additional time to evaluate performance and adjust roles based on evolving business needs."

Still, at senior levels, “long-term fixed commitments are sought by firms to reduce sudden loss of talent and to align with business plans", said Adil Ladha, partner at Saraf and Partners. These can be for a period of three years and more, but could be difficult to enforce, he said.

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