What are the different types of employment contract?

What are the different types of employment contract?

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Employment contracts are not only a legal requirement, but they’re also extremely beneficial to both the employer and employee. There are four main types of contract businesses use, these are permanent, fixed-term, casual and zero hour. The contract you receive is based on your employment status and is to be agreed with the employer to ensure both parties are happy with its terms.

So whether you’re an employer looking to onboard new staff, you’re a professional looking for your next role or you’re considering taking legislative courses and want to broaden your knowledge – we’ve got you covered. In this guide we’ll look at what an employment contract actually is, the legalities behind these documents and we’ll look in-depth at the four different types of contacts out there.

What is an employment contract?

A contract of employment in the UK is a document which outlines the conditions of your employment – including rights, responsibilities, salary, and any benefits you are entitled to. This is a binding contract between employer and employee and sets out the legal requirements of both parties. All the terms of the contract are agreed upon when the employee joins the business and if any of the information therein changes throughout their employment, an updated contract must be issued.

Do employers have to issue these documents?

It is a legal requirement for employers to issue a contract to all staff. While it doesn’t have to be on their first day, a contract must be signed within the first two months of employment. That said, all the terms should be agreed verbally beforehand and are still legally binding, this means the employer must still pay and grant holiday even before the official document is signed. It is therefore in the best interest of both sides to get the employment contract written up as soon as possible.

In this next section we’re going to look at the four main types of employment contract in more detail.

What is a permanent employment contract?

Perhaps the most widely understood document, permanent employment contracts are given to those who will be working regular hours for their employer, including both full-time and part-time roles. These cover those who are salaried or work for an hourly rate, and they are ongoing until the employee leaves the business. This type of contract entitles the employee to the full range of benefits and employment rights, outlining their working hours, responsibilities and terms of payment.

What is a fixed-term contract?

A fixed-term contract is more popular amongst freelancers and contractors as they set an end date for the employment. For example, a contract could last three months, six month or a year. The contract can be extended but is put in place to ensure that temporary or contract staff are given the same rights as those in permanent employment.

The contract will outline the dates of employment as well as the salary and rights that we’ve already mentioned above. Those who overstay their contract without extending it are considered to then become permanent employees and must hand in a notice if they want to leave the company, otherwise they’re free to leave on the agreed end date.

What is a casual employment contract?

Casual employment contracts are for those who want security. This includes the employer wanting the individual to commit to the business and the employee wanting to guarantee working hours. That said, these are not fixed hours like in a permanent contract. The two parties agree on the minimum number of hours they’ll be guaranteed each week or month.

For example, the contract could outline that the worker will be given 16 hours a week, but it doesn’t have to state when these hours will be, so shift patterns can differ. The document entitles the employee to statutory sick pay and other benefits, and means they’ll accrue holiday depending on how many hours they work.

What is a zero hour contract?

Finally, there’s the zero hours contract for those who aren’t able to commit – and this applies to both sides. This means there is no obligation for the employer to offer a set amount of hours and the employee can take or leave the hours they want. These contracts entitle workers to some statutory rights, though these are often less than those of the previous three documents we’ve discussed. It’s also worth noting that this type of contract means the worker is not exclusive to one company, they can also work for other people.

No matter what the terms are of your employment, it’s important to read your contract carefully and to iron out any questions or discrepancies you may have before you sign it.

Nick Cooper
Nick is NCC's resident blog author and covers a range of subjects, including teaching and health & social care. NCC is an international learning provider with over 20 years’ experience offering learning solutions. To date, NCC has engaged with over 20,000 employers, and delivered quality training to over half a million learners.
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