Overview of an Employment Contract

Employment contract is a contract in which the company hires an employee. It details the provisions and aspects of the employment.

What is an Employment Contract ?

An employment contract is a legally bound document between a company or an employer and an employee at the time the individual is hired. It states the nature of the work and also establishes both the rights and responsibilities of the two parties. It typically includes salary or wages, schedules, duration of employment, confidentiality, communications, benefits, and future competition. Other terms such as an ownership agreement, information on settling the dispute, qualifications on where the employee can work after leaving the company may be included.

Different Types of Employment Contracts:

Full-time contracts:

These types of contracts are the most common, the contract includes the employee’s salary or hourly wage. These contracts are offered for full time permanent positions.  Other details included in a full time contract are holiday benefits, pension, parental leave, healthcare, and sick leave. Generally full time employees work 35+ hours a week.

Part-time contracts:

Part time employees have less working hours than a full time employee however, they may also hold permanent positions, and their contracts contain many of the same terms as a full time employee. The amount of scheduled hours per week should be clearly stated in the contract, as well as any optional overtime hours. Benefits of part time employees include more flexible hours, allowing the employee to fit their work around other commitments, and other opportunities that may arise.

Fixed-term contracts:

these contracts have been set and agreed upon in advance to last for a specified amount of time. In some cases fixed term contracts do not include an exact time frame but instead will end when a specific task is fulfilled or completed. Fixed terms employees enjoy the same rights and benefits similar to a full time employee, although factors such as holiday pay will depend on the length of the contract. Fixed term contracts can sometimes lead to longer term positions depending upon the position and the individual’s performance.

Temporary contracts:

These are offered when a contract is not expected to become permanent and will have an end that may be subjected to change. Temporary contracts may be extended inline with demand and availability. Temporary workers receive the same rights as any other members of the staff. Benefits of a temporary contract include building experience with a specific sector, the ability to manage work around study or other interest, increase flexibility. 

Agency contracts:

These types of contracts are managed by an employment agency or recruitment office. The length of the contract will depend on the demand of the employer as well as their availability, these types of employees work on a temporary basis. It is the agency’s sole responsibility to ensure the employees’ rights are protected. Sick leave and other benefits are paid by the employer to the agency on behalf of the employee.

Freelancers and contractors:

Contracts may differ from position to position, employees are generally considered self employed which implies that all government issued taxes if applicable are to be paid by the employee. The salary may be based on pieces of work or set projects, including a start and end date, meaning the contract ends upon completion.contractors and freelance employees may not be entitled to the same rights as permanent employees. However the freelancer or contractor gets to negotiate their own terms and manage their own schedule.

Zero hour contracts:

Also known as casual contracts meaning an employee works only when they are required by the employer. The employee is not obligated to accept any work that is offered to him/her, and the employer is not obligated to provide any set work hours for the employee. Casual contract workers are entitled to the same yearly leave as permanent workers. In addition, they may also seek employment elsewhere.

Checklist of an Employment Contract

 

  • It should state the full name of the employer 
  • It should state the full name of the employee 
  • The employer’s address/ place of business
  • The place/places in which the employee will work 
  • The title of the job and duties the employee is obligated to carry out
  • The start date 
  • If the contract is temporary the expected duration of the contract and the date it will expire
  • The rate of payment and method of calculation of pay 
  • When the salary is payable e.g. monthly, weekly, daily
  • Any terms and conditions related to the employees hours of work including overtime 
  • Any terms and conditions related to paid leave e.g. annual leave, sick leave, etc..
  • Any terms and conditions related to pension 
  • The period of notice of a voluntary (employee leaves on his own accord) or involuntary  termination ( an employee is laid off, fired).
  • Reference to any grievance or disciplinary procedures.
  • If a probation period is required and how long it should be 
  • Restrictive clauses

Probation Period

Probation or probation period is a status given to new employees of a company business or organization. This allows the employer to evaluate the progress and skills of the new employee, and monitor other aspects of the employee such as interaction with co-workers, customers, supervisors, reliability, and honesty. Probationary period varies widely depending on local labour laws. If the employee shows promise during the probation period they may be offered a promotion as well as a raise. A probationary period allows the employer to terminate the employee that is not suitable for the position. Some companies instead of the probationary period conduct multiple interviews of a candidate 

Termination of an employment contract

There are many factors that need to be considered with local labor laws regarding termination that will vary around the world. All terminations should be handled with care and discretion. 

Before terminating an employee the employer should review the employment contract there will be key components to consider including contractual notice period, seniority, severance provision, benefits, and whether a collective labor agreement applies that would help determine the timing and costs involved in terminating a particular employee.

In each termination it is mandatory to comply with local laws and review the employment contract to avoid damages. 

 

Key points:

  • Details of the job;
  • Duration of the employment and duration of probation period (if any);
  • Details of the remuneration and how often the employee will be paid;
  • Entitlement to annual leave and holidays;
  • Details of the work arrangements;
  • Notice required for termination; and
  • Whether post-termination restrictions apply and, if so, the duration and geographical limit for such restrictions.

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