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Understanding different types of employee contracts

There are various types of employment contract and which one is suitable for your business in any given situation will depend on how you intend for the employee to work, how long they will work for your business, and the hours the employee will work.  This article just looks at employment contracts for different types of employee. To establish whether you are taking on an employee, worker or self-employed contractor, you can get more detail in our dedicated article on the hub.

Types of employment contracts in the UK

Whilst there will be some differences in the way in which employees work, all employees must be given a written statement of employment, or contract before they start work which complies with s1 to s3 of the Employment Rights Act 1996. Amongst other things employees must be provided with a payslip showing payments and deductions made, be paid a minimum of the National Minimum Wage per hour worked and must receive at least the statutory minimum level of paid holiday and rest breaks for the time they work. Employees may also have entitlement to Statutory Sick Pay and other leave, such as maternity leave and they should be provided with those, accordingly. If you would like further advice on what to include in your contract of employment our employment lawyers can advise you further.

Full-time contracts

This is the traditional and most common type of employment contract currently in use by businesses in the UK. It’s generally offered to those seeking permanent positions, outlining the employee’s hourly wage or salary.  It also applies to individuals who are employed and self-employed simultaneously. This type of contract will detail all of the above items together with any other employment benefits such as pension benefits, bonuses or commissions and  healthcare insurance and where company policies relating to disciplinaries and grievances for example, can be found or with drafting other employment policies or a staff handbook, our employment solicitors can help draft documents that will specifically suit your organisation.

There is no minimum requirement for the number of hours you’ll have to work with a full-time contract. Although, most employers recognise a full-time working week as thirty-five hours or more.

Part-time contracts

Part-time employees work fewer hours than full-time employees but can still hold permanent positions. These two different contracts share many similar parameters.

The number of hours part-time employees are contracted to work each week must be clearly outlined in the agreement. However, the option of working overtime may be included if both you and the employee agree to this. It is likely that salary will be pro-rated according to the number of hours worked. If an employee works 50% of the hours of a full-time worker, it is likely they will receive 50% of the salary and this should be clearly stated in the contract.

One benefit afforded to part-time employees is a more flexible schedule. It allows employees to fit their work program around any other commitments they may have. It also allows employees to explore other opportunities without dedicating vast amounts of time away from their job. If an employee is to work part-time you will want to consider whether they are allowed to have other paid employment at the same time and if this is permitted, on what basis and whether a self-employed model might be more appropriate in the circumstances.

Casual employee employment contract

Whilst many of those who work casually will be workers rather than employees, there is a growing trend towards employers taking casual workers on as employees. In a casual working arrangement, there is not usually an obligation for an employer to offer work nor for the individual to accept work. However, in a casual employment relationship, a series of separate contracts exist and there is an over-arching contract of employment or ‘umbrella contract’ operating even when the individual is not working. You may choose to engage an individual on this basis if you operate in a niche sector and want to use the same individuals to carry out work so that you don’t have to keep recruiting new individuals, retraining them and then hoping that they are consistent and as capable as the last individual to have performed the role.

Fixed-term contracts

Fixed-term contracts are set to last for a particular period, which both parties agree on in advance. In some cases, they may not include a precise time frame but will conclude when a specific project is finished, or event takes place.

Employees working under this type of contract enjoy the same rights and benefits as those employees working under a permanent contract. However, benefits like holiday entitlement will be dependent on the contract’s length and are likely to be pro-rated.

Fixed-term contracts can sometimes result in long-term positions depending on the assigned role and performance. If you are looking to employ an individual on this basis you will want to ensure the wording of the contract is precise so that it achieves your business’ objectives. Our employment lawyers can help with this.

Temporary contracts

Like with a fixed-term contract, this sort of contract is offered when the position is not expected to be permanent. It will have a given end date in most cases, which might be subject to change. As such, temporary employees have their contracts extended based on demand and availability.

Even with their short-term status, temporary employees are still entitled to the same rights as those employees with other contracts. Some of the benefits of such contracts are that your business will have flexibility to employ individuals when demand is high, such as with seasonal fluctuations in demand for work.

Agency contracts

Agency contracts are generally drafted, agreed upon, and managed by an employment agency or recruitment consultancy firm for workers rather than employees. They usually have a short lifespan, and the length of the contract will depend on demand and availability. However, it’s important to note that after 12 weeks of continuous work in the same role, agency workers can be afforded the same rights as permanent employees of the business and so can look like an employment contract in some ways. It is worth being aware of this before hiring on the basis of an agency contract and when deciding whether using an agency contract is right for your business.

It is the agency’s responsibility to ensure that their employees have rights and that they are protected. However, you would pay any Statutory Sick Pay and National Insurance Contributions due in respect of the individual’s employment, to the agency. You would also be responsible for the health and safety of an agency employee, for ensuring they have access to the terms and conditions of employees to ensure they have the same rights and access to shared facilities. Employer sharing information with other employees would also fall within your remit.  

Director’s Service Agreement

Executive Director’s will need an employment contract which covers not only the usual employment terms, but some additional terms particularly to cover director duties. A director's service agreement should always be approved by the board and are subject to statutory and regulatory disclosure and inspection requirements and statutory and regulatory requirements regarding notice periods and compensation for loss of office. Specific reference to Director duties is important in the employment contract. Having an awareness of this and seeking specialist advice from an employment lawyer prior to a Director starting work, is advisable.

Conclusion

Employment contracts are not only legally necessary, they are also highly beneficial to both the employee and employer to clearly set out how the employment relationship will operate on a practical level and should match the reality of the working relationship and what both parties have agreed, so far as it is possible. If you have any questions about any of the above types of employment contract, or you would like advice on which might best suit your business, our specialist employment lawyers can help.


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