Why Verbal Agreements With Workers Are Risky

Many small and medium businesses rely on verbal or “handshake” agreements to avoid paperwork, but these fall apart the moment a workplace accident occurs. Legally, verbal understandings do not override statutory compensation obligations, and the absence of written records makes it harder to define job scope or defend liability claims. Most IRDAI-compliant policies require documented proof of employment, without which claims may be rejected. Regulators also treat missing documentation as a compliance lapse, exposing employers to penalties. In high-risk environments, informal arrangements quickly become costly liabilities.