Different Types of Employment Contract
There are a number of different types of employment contract. We have set out below a brief description of the different contracts that employers may normally operate.
How to choose the right type of employment contract
We can guide you through the process of determining the type of employment contract that suits your business and accurately reflects the arrangements you have with your employees.
The list below is not exhaustive and you should bear in mind that each of the employment contracts listed can have numerous variants. We can provide guidance to you in order to ensure that your contract fits your circumstances perfectly.
Full-Time Permanent Employment Contract
This is probably the most common type of employment contract. Full-time permanent employees are often the cornerstone of a business and many employers are incredibly reliant upon this type of worker. This type of contract can be based upon the employee being hourly paid or salaried and should set out the employees working hours, holiday entitlements, position within the organisation, and various other aspects of the employee’s working arrangements.
A contract of this type can be simple or complicated depending upon the employee’s seniority. For instance, an employer may want to prevent a more senior employee from going to work for competitors by adding restrictive covenants into the employment contract. Alternatively, it may wish to ensure that the confidentiality requirements its senior employees have to abide by are suitable and appropriate for their proximity to confidential business information.
Part-Time Employment Contract
Normally, a part-time employment contract would contain much of the same information as the contract of a full-time employee. In the part-time employment contract, employers need to have a particular focus on the employee’s working hours and pay. It is also important to ensure that the holiday entitlement for part-time employees is clearly and accurately reflected in the contract and meets the relevant statutory requirements.
The law protects part-time workers from being treated unfavourably on the basis that they are employed part-time. It is important to make sure that the terms and conditions of employment for part-time employees are comparable to those of full-time employees in the same organisation.
Director’s Service Agreement
A service agreement is generally the most detailed and heavy duty type of employment contract. Normally this document would contain specific details about how the director should behave within the business and the scope and extent of their duties. Service agreements are often very comprehensive documents.
As a director would usually have unlimited access to a company’s financial and confidential information, a service agreement almost always contain restrictive covenants and thorough confidentiality requirements.
Fixed-Term Employment Contract
A fixed-term employment contract is normally for temporary employees. The duration of the contract can be anything from a couple of weeks to a few years. This type of contract can vary dramatically in its scope and extent.
Temporary staff who are expected to be with your business for a few weeks may only require a very basic set of terms and conditions whereas employees undertaking specific projects over the course of a year or two can sometimes need very carefully drafted and prescriptive employment contracts.
Zero Hours Contract
The zero hours contract has proved to be somewhat controversial in recent times. The government is currently in the process of implementing certain restrictions on how zero hours contracts can be used. The zero hours contract can however be a very effective tool for employers.
A normal employment contract would create a mutual obligation between the employer and the employee. The employer agrees to provide a certain amount of work and the employee agrees to go and carry that work out. The zero hours contract waters this obligation down by allowing the employer to require the employee to come to work without guaranteeing to provide work to the employee. This means that the employer can call upon the services of the employee as and when required.
Zero hours contracts can often require a great deal of consideration and it is important that arrangements with employees are such that a zero hours contract can be used.
Casual Work Contract
Casual working arrangements can sometimes be confused with zero hours arrangements. There are however some fundamental differences between the two. A casual work contract is generally applicable to a person who is classed as being a ‘worker’ rather than an ‘employee’. Workers have fewer employment rights than employees. The casual contract is not normally a permanent employment contract and would, for instance, be used for seasonal workers who work only a few weeks of the year.
Unlike the zero hours model, a casual worker would not normally be obliged to accept work offered to them and may not qualify to be paid statutory payments such as statutory sick pay.
A consultancy agreement is normally used when an organisation wants to engage the services of an individual who will not be employed. Where an individual will be self-employed, they will normally need to be provided with a consultancy agreement.
This document can take a variety of forms. It can be a simple letter or it can be a lengthy contract. A consultancy agreement is often a key tool in protecting the parties from complicated tax issues. Perhaps more importantly, the consultancy agreement is essential to protect the organisation engaging the consultant from being susceptible to challenge from HMRC on the basis that the consultant is actually an ‘employee’.
Without a consultancy agreement in place the consultant may allege that they are employed and consequently should be given normal employment rights, including the right not to be unfairly dismissed. This could create a very troublesome and expensive situation for the organisation engaging the consultant.