The Different Types of Employment Contract

Close-up of a businesswoman signing a document

Whether you’re looking for your first graduate job, hoping to move to the next level in your career or deciding to change careers altogether, there are several different kinds of employment open to you. You can take on temporary work with flexible scheduling, sign up for a full-time position with numerous benefits or pursue a creative passion as a freelancer.

Whatever kind of job you choose, there’s a corresponding employment contract you’ll need to sign off on. Your first step is to learn about your country’s employment laws, easily found on websites like the Illinois Department of Labour’s ’Worker Rights’ page or the UK government’s section on contract types. These sites cover the rules your employers must follow about issues like mandatory break times, minimum wage and insurance contributions.

Next, you’ll need to know about all the different types of employment contracts, which vary by format, job type or special arrangement. Read on to learn what’s included in each kind of agreement and what to look for to help you decide if it’s the right job for you.

Written, Verbal and Implied Contracts

The first thing you need to know about contracts is the three different versions you will encounter when accepting a job offer. How you accepted employment can affect your legal rights.

Written

When you get an agreement in writing, it will likely specify a lot of details like the number of hours you’re expected to work, whether you receive overtime pay, how many sick and vacation days you’ll earn, and the penalties for poor job performance. If management violates your rights in any way, a written contract is the best way to prove your case in court.

Verbal

You’ve probably had jobs that began with a simple handshake agreement, where the boss or hiring manager offered a position with a set salary and benefits, and you agreed. Whatever terms were established, including probationary periods and client retention numbers you were required to achieve, can also be argued in court if you were wrongfully terminated. The problem is that you’ll need reliable witnesses and any other valuable confirmation to prove the verbal contract existed.

Implied

An implied contract between employer and employee requires some interpretation. It’s not an explicitly written or verbal agreement specific to you, but you likely had expectations due to the company’s written policies or their actions during your tenure. If management had well-established guidelines of only firing workers who were formally reprimanded three times, for instance, then you can legally protest getting let go for a single infraction.

Full-Time Contracts

This is the most common type of contract, for permanent employees who work a full week of around 35 hours or more. A full-time contract typically offers the most benefits, like abundant paid holidays, vacation time, sick leave and pension benefits. Depending on the company, you might also get added perks like double overtime pay, financial support for continuing education and premium health insurance.

Since you’ll be spending a large portion of your life at a full-time job, survey the contract details carefully. Even if there isn’t a written agreement to peruse, ask for specifics when you’re offered the position. If there’s anything that makes you uncomfortable or doesn’t suit your career goals, you can try to negotiate for something better or politely decline the offer.

Part-Time Contracts

The contract for part-time workers is similar to those for full-timers, with more emphasis on the number of hours worked and how overtime is handled. Part-time work can still have the same stability and job security as full-time, but with more flexibility to schedule around schooling or childcare.

In the US, there is typically a significant difference in benefits between the two types of contract, with only the best part-time jobs offering health insurance coverage and paid vacation.

Zero-Hours and Casual Contracts

Technically, there are subtle differences between casual and zero-hours contracts, but some companies use the terms interchangeably. As always, be certain about the exact terms of your employment before taking the job.

Zero-Hours

Employers agree to offer work when it’s available, and employees agree to be on call for shifts or assignments. Zero-hours staff are sometimes expected to take any work that comes in, but often there’s only a minimum requirement – five shifts a month, for example – with right of refusal for any assignments or days that are inconvenient for the employee. Employers may also agree to consistently offer a minimum amount of hours or work. The more detailed the relationship in the contract, the more rights you may be able to claim as a company employee.

Casual

Most seasonal jobs fall into the casual worker category. The employer’s only commitment is to pay for completed work. The company isn’t required to offer any shifts, and the worker isn’t required to take any that are offered. These relationships are usually only for a short term and won’t necessarily be repeated the next month/season/year.

Apprentice Contracts

When making the move from jobseeker to wage earner, most workers don’t jump right into their dream job, especially in fields that require a lot of experience and possibly advanced degrees. An apprenticeship allows you to get paid while you train for a position.

Apprentice contracts can specify hours, the salary, whether training is done in-house or in conjunction with another organisation, and if a full-time position will be available once the apprenticeship is complete.

In the US, apprenticeships are often part of a union contract (see below), while the UK offers several different kinds of apprenticeship levels depending on your educational qualifications.

Fixed-Term or Temporary Contracts

While many full-time jobs operate under a verbal agreement, fixed-term employees (sometimes colloquially referred to as ‘contract workers’) typically have a very specific written contract. It offers work for a set time period or until a specific task or event has been completed.

Temporary workers take over a specific job for a short time, helping out during a busy season or filling in for a regular member of staff who is out sick or on a sabbatical. Both fixed-term employees and temps work the same hours and receive many of the same benefits as permanent staff.

Temp jobs can sometimes turn into permanent positions, so if you’ve been endlessly searching for full-time work in your field, consider using one of these short-term gigs to get your foot in the door of a major company.

Freelancers, Consultants and Contractors

Like fixed-term workers, freelancers offer to complete a specific project, like taking professional photos at a press conference, designing the homepage of a website or remodelling a home kitchen. The related contracts may specify time limits, project details and salary.

Freelance workers are considered self-employed and, therefore, are responsible for their own insurance as well as claiming taxes. Being your own boss also means you can decide what hours to work and what projects to take. This makes it an ideal way to try out a new career while you’re still working at your regular full-time job.

Executive Contracts

Companies looking for high-quality employees for upper management will offer incentives to lure the best candidates away from other firms. Those job perks will be spelled out in executive contracts, along with details about salary and lucrative severance packages.

These agreements will also be very specific about responsibilities and duties, including meeting specific sales goals or expanding the business into different markets. They also may include specific clauses about confidentiality and competitors.

Non-Compete and Confidentiality Agreements

As indicated above, these agreements can occur as part of a larger employment contract. They may also appear as standalone written documents that all employees, regardless of position or type of contract, are required to sign.

A non-disclosure agreement (NDA) forbids employees from revealing proprietary or confidential information to anyone outside the firm. The non-compete agreement (NCA) will prevent you from poaching clients to kick off your own business or to take to another company. It can also keep you from working for a competitor for a certain length of time.

At-Will Agreements

Most US workers have either an official or implied at-will agreement, meaning they can leave a job whenever they want and can be let go at any time without reason – provided it’s not due to discrimination or other situations prohibited by law.

Be aware that even if you have a very detailed contract, including salary, bonuses and scheduled promotions, it doesn’t necessarily provide job security unless the at-will default is specifically revoked. Many companies have every employee sign a separate at-will agreement, even if there’s no other written contract between them, to help protect the top executives from wrongful termination suits.

Union Contracts

As a new employee, you may be required to join a local or nationwide union of workers for your particular trade. While the company itself is still responsible for hiring you and paying your salary, the union negotiates that salary as well as other benefits on your behalf.

A union contract can detail job descriptions, the exact path of advancement or termination, the amount of vacation time, and the pension plan. Jobseekers often make the mistake of not researching if a union is in place at the job they’re applying for, even though it’s something that substantially dictates your work life. Ask about the contract’s specifics, including the dues you pay to support the union financially, before taking on the job.

There’s a lot to learn about the different types of employment contracts, but the longer you’re in the workforce, the more chances you’ll have to become familiar with each kind. Do your research before you apply for a job and ask detailed questions once you receive an offer.

How many of these contract types have you worked with? Join the discussion below and share your experiences!