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Types of employment contract for your employees

Aug 30, 2022

Within the world of work, there are many types of employment contracts, each with its own characteristics and purpose. Most contracts contain similar information but are distinctly separate in various regards. Read on to find out which contracts are right for the employees in your organization.

Contract legislation

According to L&E Global, there are no minimum requirements for employment contracts in the United States. New employees are typically given a written offer of employment that contains information typically found in an employment contract. There's no legislation governing the length of a fixed-term contract or employment trial periods. Rather, organizations will decide on an introductory or probation period at their own discretion, usually between 90 and 180 days in length.

Termination isn't governed by law either. Instead, it's assumed that both the employer and employee understand that employment can be terminated at any time by either party (an "at will" agreement) or according to any relevant provisions in the written offer of employment. However, the Worker Adjustment and Retraining Notification Act states that employers must give 60 days' notice to employees who will be affected by plant closings or mass layoffs.

Contract types

As ContractCounsel explains, employment contracts set out the terms and conditions of employment. They may be written or verbal and both are considered legally binding. Per Factorial HR, written contracts offer both the employer and the employee the most protection (in case of a breach of contract) because there is physical evidence.

You can decide which contract is right for an employee based on how long you want to employ them, how many hours you want them to work, the nature of employment (i.e. the employee's responsibilities) and compensation and benefits you're able and willing to offer.

  • Permanent: This is the most common type of contract wherein the duration of work is indefinite. Both full-time and part-time employees can sign permanent contracts and these employees are usually eligible for benefits. Permanent contracts are suitable for full-time employees working at least 35 hours a week.
  • Fixed-length: With fixed-term contracts, the duration of employment is specified. Employment is typically terminated when a specified date is reached or a specified task is achieved. This type of contract is usually given to seasonal, temporary or freelance employees, as well as independent contractors.
  • Casual: Casual contracts are routinely used when an employee's working hours are unpredictable. An employee is promised a certain number of hours but can be assigned additional hours if agreed upon. This type of contract is usually for apprenticeships and freelance work.
  • Zero-hour: Rarely do employers make use of zero-hour contracts because they don't stipulate any number of hours to be worked.

Contract contents

Regardless of the type, employment contracts commonly include:

  • Working/business hours
  • Remuneration (salary/wage)
  • Duties and responsibilities (job description)
  • Employment period and type
  • Whether the work is on or off-premise
  • Benefits and other non-monetary compensation
  • Competition clauses
  • Confidentiality or non-disclosure agreements
  • Paid time off, sick days and vacation policies
  • Skill requirements
  • Termination policy

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