A contract is a binding agreement between two or more people or organisations that is enforceable by law. One party makes an offer and the other accepts it, with the mutual consent of both parties. In this explanation, the focus is on the different types of contracts of employment and their essential terms and conditions. Let's take a closer look.

Contracts of employment in business

An employment contract, like any other contract, is a binding agreement between two parties that is enforceable by law. When a company hires an employee, it needs a written or verbal agreement to complete the process.

For employment contract formation, the employer and the employee must agree on the terms and conditions of the contract. Although by law it is not a necessity to have a written contract, the employer is required to give employees a written statement covering the terms of employment within two months of the start of said employment. The employment contract helps in avoiding disputes between employer and employee in the future.

Terms of an Employment Contract

Terms are the stipulated conditions mentioned in the contract. These terms may change depending on the type of contract, but some of the common terms of the employment contract are discussed here.

1. Job information – This is a part of the contract and defines the role and responsibilities of the employee. It includes the job title, job description, and the assigned team.

2. Salary and benefits – This section describes the kind of salary that the employee is going to receive. It could be written as an hourly, monthly, or annual salary. Additionally, employers may mention benefits such as health benefits, paid vacations, bonuses, etc.

3. Sick leave and vacation policy – The policy on sick leave and vacations must be included in the contract. The questions of paid sick leave and vacation are answered throughout this section. Employees will also find out about the process of how to apply for sick leave and vacations. For instance, many organisations want their employees to notify them in advance about planned vacations, which helps in managing the workforce effectively.

4. Employee classification – This term shows the type of employment of the employee. The types of employment will be discussed later in the article. Full-time and part-time employment is the most common employee classification. This term is important because it has an impact on factors such as tax and insurance compliance.

5. Employment duration – This term describes the duration in which the contract is effective. It could be limited to one or two years, after which a new contract with different terms and conditions is negotiated with the employee. In some cases, companies may give unlimited contracts to the employee.

6. Termination policy – The conditions related to contract termination are stated. For instance, the actions that would lead to termination or mutual termination of the contract.

Terms of the employment contract, StudySmarter

Types of Employment Contracts

The type of employment contract describes the working arrangement between the employer and the employee. Let's have look at the three common types of employment contracts.

Permanent contract

A permanent contract is the most common type of employment contract. Permanent employees work regular hours, including both full-time and part-time employees. These employees work either on salaries or hourly rates, depending on the agreement with the employer. This type of contract gives the full range of benefits and rights to the employees. Both parties have the right to exercise termination.

Fixed-term contract

As the name suggests, this is a type of contract with a fixed duration of employment. The start and end dates of employment are specified in the contract. The time period could range from 6 months to a year, depending on the need of the company. After the contract duration ends, it might be extended further. These employees enjoy similar rights and benefits as those with a permanent contract. If a fixed-term employee works for two or more years in the company, they will acquire the status of a permanent employee.

Types of employment contract, StudySmarter

Temporary contract

This type of contract is for those employees who are hired temporarily. For instance, a retailer might hire temporary employees during the period of Black Friday or logistics companies may hire temporary employees to meet urgent demands. Once the demand is no longer there, their services will no longer be required. There are no fixed working hours for such employees.

Employment Rights and Responsibilities

Once an employment contract is signed, the working association between employer and employee starts. With this comes certain rights and responsibilities they are required to fulfil.

• Health and safety are important factors in a workplace. An employer must ensure a safe working environment, and employees should perform their duties without endangering their lives or the lives of coworkers.

• The employer should provide all the necessities in the workplace.

• There should be no discrimination based on race, gender, or religion in the workplace. The employer should ensure a harassment-free working environment.

• Employees should get fair compensation for their work, and it should be on time.

• Employees should be allowed to take leave of absence in case of family, personal emergencies, or maternity leave.

• There should be equal growth opportunities for employees based on their performance and skill set.

• Employees must perform their duties up to the standard which is expected of them.

• Employees cannot be forced to work for more than 48 hours a week.

• The employer has the right to clarify and bring changes to employees’ roles.

Employment Contract Law in the UK

Now let's look at some key points of contract law in the UK. A standard contract here is an open-ended contract that can be terminated on notice. There is no legal requirement for a written employment contract - it may be fully or partially oral. However, the employer is required to inform the employee about the terms and conditions of employment in writing.

A full-time permanent employment contract is the most common one in the UK. However, there is an increase in employees with flexible working schedules. It shows that part-time and fixed-term contracts are more in demand. The probationary period is usually between three to six months, during which employees are not entitled to certain benefits. In this period, the employer evaluates employee performance and if it is not deemed up to the mark, the contract could be terminated.

An agreement between employer and employee in the form of a contract is important. It can avoid disputes between both parties and it ensures that the rights and responsibilities are being fulfilled by both parties. Every important term and condition should be made part of the contract.