What are the Different Types of Employee Contracts?

A contract of employment is essentially an agreement between the employer and the employee. It should have the purpose of outlining the specific terms and conditions of employment.  This can be either verbal or in writing and it can be regarded as forming the basis of the employment relationship between employer and employee.

The implications of different types of employment contracts can mean that there are different outcomes or considerations for the employer, depending on the type of contract. A full-time contract involves a set amount of working hours and terms and conditions including the minimum hours set by the employer, which is normally 35 hours or more a week. A full-time contract is also usually covered by employment laws and implies a permanent employment type. A full-time contract can also be beneficial for staff retention and be more attractive to loyal and committed employees. It is also more difficult to terminate if things go wrong.

In contrast, a part-time contract incorporates working fewer hours than full time. A part-time contract is also covered by employment laws, as with a full-time contract. As with a full-time contract, it can help to retain valued employees. With this type of contract, there may be additional administration and induction costs. Part-time contracts could also affect the organization negatively as there could be a potential lack of continuity in staffing and work activities. The lack of continuity could potentially cause some communication problems and a lack of fluidity in the workforce and with the meeting of work objectives. Depending on the type of employment this could impact interpersonal skills and relationships with customers and clients.

Another type of contract is a fixed-term contract, which only lasts for only a certain length of time. This could be agreed upon in advance and end when a specific task is completed or when a specific event takes place. It could also end when a work objective has been met or completed. This type of contract can be useful to cover set projects or periods of time. A fixed-term contract can be expensive to terminate if the notice arrangements are not clearly set out in the contract and fully understood by the employee. There may also be a limit on the time of a fixed-term contract.

A zero-hours contract can usually be used for ‘on-call’ work or on-demand work. This is when employees are asked to work when needed by the company or organization. In these cases, the employees do not have to work when asked if they do not want to. This kind of contract can be more cost-effective for specific duties and tasks and could be an alternative to using an agency to hire workers. The employer will still be held responsible for employee health and safety. Zero-hours contracts can be beneficial to businesses and organizations as they can be regarded as more cost-effective. However, as with part-time contracts, there may be less continuity of staff.

A contract with an agency whereby agency staff is taken on as workers rather than regular employees means that the employment contract is with the employment agency, not the company or organization itself. This can reduce administration with recruitment and termination of contracts, as it is the responsibility of the agency. It can be beneficial to a company or organization as there can be flexibility to increase or decrease staff at short notice and have availability of staff. As the agency is responsible for compliance with working regulations; this reduces the responsibility of the company or organization. It can be potentially more expensive than hiring employees within the organization, as the agency may charge extra fees.

Another option is that of using contractors. Contractors are self-employed, and not generally covered by employment legislation.  The company or organization is still responsible for health and safety issues. Contractors can be beneficial for specific project-type work but may cost the company or organization more in the long run.

Implications of Employment Contract Types to Employees

There are many different contracts for employment and all these different contracts are devised to show what arrangements the business has made with an employee and also whether the contract is suitable for the business.

1. Full-time contracts – Full-time contracts are usually the most reliable and are usually the cornerstone of a business. A full-time contract will contain details such as hourly pay, working hours, holiday entitlements, position in the business, and any other aspects of the employee’s work arrangements. A full-time contract can either be basic or complicated depending on the work objective. A full-time contract can provide access to the full range of employment benefits such as staff discounts, health insurance, company cars, etc. They can also offer potential job satisfaction and greater career and personal development opportunities.
2. Part-time contracts –  Staff who are given a part-time contract usually have a similar contract to a full-time contract, although a part-time contract should be very specific about the hourly pay and working hours. A part-time contract should also contain the employee’s holiday entitlement for a part-time staff member that meets the relevant statutory requirements.  Full-time and part-time contracts must have the same terms and conditions of employment and provide the same employment rights despite being employed to work part-time. Part-time contracts can offer greater employment flexibility and potentially better work-life balance.
3. Directors service agreement-  Individuals that are given a director’s service agreement is a heavy-duty employment contract that is very detailed. This employment contract will contain the director’s scope and extent of his/her duties and details of how the individual should behave within the business. Directors’ contracts are usually very specific and detailed documents. The director’s contract would usually contain restrictive covenants and thorough confidentiality requirements as usually the director of a company/business would have access to the business/company’s financial information.
4. Fixed-term contracts – Fixed-term contracts are often used for temporary employees, whereby the duration of the contract can vary in length, from a couple of weeks to a few years. Fixed-term contracts offer the same employment rights as full-time permanent staff.  Employees on a fixed-term contract would only probably require a more basic set of terms and conditions but if the employee remained working for a year or more the contract may need to be changed, especially if they are undertaking specific projects. A fixed-term contract offers an individual employee flexibility in their commitment to work. There may be rights to become a permanent employee if the contract is renewed over a number of years.
5. Zero-hours contracts – Zero-hours contracts can mean that the employer requires the employee to work but there is no guarantee that there will be work available. This means that the employer could contact the employee to work as and when the business/company requires them to. The employee is entitled to the same basic terms of employment as part or full-time employees. The downside could be that there is no guaranteed level of regular earnings, which may be difficult for individual employees. This could then also cause difficulty in managing work-life balance.
6. Casual working contract – Employees with a casual work contract are known more as workers than an employee. A casual work contract means that the contract or work may not be permanent and the individual who has this type of contract may be only be employed for seasonal work. A casual work contract is not the same as a zero-hour contract as again as they are classed as a worker, which means they have fewer employment rights, so they may not qualify for statutory sick pay or maternity pay.
7. Agency agreements – Working for an agency can provide an employee with the same rights to pay and most benefits after working for a period of 12 weeks.  Agency employees may be entitled to the same basic terms and conditions as direct employees. There may be more employment flexibility which can suit some individuals better, depending on their individual circumstances.
8. Consultancy agreement – Individuals with a consultancy agreement are used when the company or organization requires the services of an individual who will not be employed.  This means the individual who has this agreement will be classed as self-employed. A consultancy agreement can come in many forms such as a large detailed contract or just a letter.  If the individual does not have a consultancy agreement the individual may assume that they are employed and that they have employment rights just like everyone else. This could include the right to claim unfair dismissal which could cost the company or organization and could cause a situation if the company engages the consultant and problems arise.

A contractor may not be entitled to the same rights as regular employees. They are able to demand a higher rate of pay due to the specialist nature of work and they can benefit from employment flexibility.