What Types of Employment Contracts Are There?

March 27, 2023

Employee Rights

Employment contracts are commonly used to define and outline the working relationship between companies and employees.

When considering an employee agreement vs. a contract, they are similar. However, employee agreements often have further detailed employer and employee rights verbiage.

So, what types of employment contracts are there?

Various contracts are available to use depending on the particular situation of employment. These different contracts serve separate purposes, as a roadmap for each party to understand their obligations and what they must do to honor them.

Examples of business employment contracts include fixed-term, at-will, and commission-based. What does contract employment mean? It means there is a legal contract in place that binds both the employee and the company to abide by the terms of the contract or potentially face legal consequences, including financial penalties and/or damages.

This helpful guide will give you an understanding of the various types of employment contracts, when they might be used, and what employers should be cautious about regarding agreements or contracts.

It is important to understand your contract to ensure that you are not being mistreated or told to act outside the scope of your contract.

What is a Permanent Contract?

Permanent contracts are the most common type of employment contract.

They are contracts between the employer and employee that provide employees with long-term job security and benefits. Permanent contracts give employees stability in their position; and provide employers with a stable workforce, giving them the assurance that they have a sufficient team to take care of business needs.

Permanent contracts often represent full-time work. A full-time contract meaning is that the work would require ~40 hours per week, not including any earned overtime.

Key provisions that an employee should look for in these types of employment contracts include:

Job description
Salary
Benefits
Notice periods for termination

A well-constructed permanent employment contract gives confidence to each party. It also serves as a legal document to help hold employers accountable if they act outside the contract’s parameters.

What is a Temporary Contract?

Temporary contracts are often used to cover short-term vacancies or seasonal work.

These types of employment contracts are used across industries in both private and public sectors, ranging from technology to hospitality. They will specify the start and the end date of employment. A big difference between a permanent and a temporary contract is that these employment contracts do not provide the same rights and benefits as permanent employees.

In a temporary contract, the worker often does the same job duties. Still, they generally are not offered health insurance, 401K, similar financial benefits, stock options, or other benefits. Temporary work may also offer the possibility for a commission-based employment contract, depending upon the job duties. In fact, commission-based employment is possible in various contracts, offering additional flexibility in making a living.

Key provisions that an employee should look for in a temporary contract include:

Duration of employment
Conditions of termination

Temporary contracts can benefit employees in the short term, but it is necessary to understand their restrictions on benefits and employee rights.

Suppose an employer fires you before the end of the specified duration of employment and outside of the conditions of termination. In that case, you may be able to pursue a legal remedy and receive compensation.

What is a Part-time Contract?

Part-time contracts are similar to permanent contracts but with reduced hours.

Employees who sign a part-time contract are entitled to the same rights and benefits as full-time employees but on a pro-rata basis. This means their benefits will be proportional to their work and contribution to the needs of the business. Additionally, the hours may not always be the same week-to-week.

The part-time employment agreement will generally include a range of hours that can be expected – but not guaranteed each week. For example, you may work 25 hours one week, and in another week, with increased business needs, you may work 35 hours. This provides a certain amount of stability but does not guarantee a regular income.

Key provisions that an employee should look for in a part-time contract include:

Working hours (standard times of day shifts or night shifts)
Days of work
Pay

Depending on the situation, workers on a part-time contract may have the opportunity to move into a permanent contract or another type of contract in the future.

What is a Fixed-term Contract?

Fixed-term contracts are similar to temporary contracts but with a specified end date.

These types of employment contracts are often used for specific projects or to cover a period of maternity leave. Typically, individuals who sign these do not get benefits or have the same rights as other employees. Fixed-term contracts are often used with consultants or industry professionals with specific skills that a permanent employee either does not have – or simply does not have the time to execute the special project.

Key provisions that an employee should look for in a fixed-term contract include:

Start and end date of employment
Conditions of termination

Fixed-term contracts can be a good way to gain specialized experience for increased industry credentials.

What is a Freelance Contract?

Freelance contracts are used for independent contractors who are not company employees.

In a freelancer contract agreement, you are responsible for your own taxes, insurance, and benefits. One of the best benefits of these types of employment contracts is that you have greater control over your work.

Freelance contracts are similar to fixed-term and temporary contracts, which can often be utilized for special projects such as website design, photography, video editing, or home renovations.

Key provisions to look for in a freelance contract include:

Payment terms
Scope of work
Conditions of termination

The “gig” economy has ramped up the number of freelancers, offering more freedom and flexibility to workers. However, it is important to remember the limitations and added responsibilities, including being responsible for your own taxes.

If the company pays you less than the terms or insists you work outside of the contract’s scope, you may have a legal case against them.

For example, say you were hired to design a website for a company for $5,000. You completed the work within the scope and timeline agreed upon in the contract. The company then turns around and only pays you $3,000. This can be cause for seeking out legal counsel.

What is an Internship Contract?

Internship contracts are used for students or recent graduates seeking work experience in their field.

These contracts are typically short-term and provide the intern with on-the-job training and mentorship. Typically, a majority of internships are not paid. However, in certain circumstances, a modest salary could be involved. If an internship is necessary for a higher education course, there is no requirement to pay minimum wage.

Key provisions to look for in an internship contract include:

Duration of the internship
Responsibilities and duties of the intern
Conditions of termination

Pay attention to the details of the responsibilities and duties in the internship contract. If the position requires you to perform regular work, you could potentially be considered an employee and gain employee rights.

What is an Implied Contract?

Implied contracts are created through the actions and conduct of the parties rather than a written agreement.

They are typically utilized when the parties have a previous working relationship. Implied contracts can arise from a long-standing practice or habit with an organizationor individual. They may include implied terms such as a duty of good faith and fair dealing. Since these employment contracts are oral – not written and signed – they are often trickier to deal with if there is a dispute.

Key provisions to look for in an implied contract include terms and conditions that have been established through the parties’ conduct.

If there is a dispute regarding termination, a court may consider current employer policies, whether there were any assurances of job security, the tenure of the employee, and their relative success at the company.

What is a Self-employed Contract?

Self-employed contracts are used for individuals running their own businesses and providing services to a company as independent contractors.

Self-employed individuals are responsible for their own taxes and benefits, just like freelancers. Another similarity to freelance contracts is that self-employed people have greater control over their work.

Key provisions to look for in a self-employed contract include:

Payment terms
Scope of work
Conditions of termination

While freelance contracts often focus on special projects, a self-employed contract lasts longer, where the business owner provides ongoing services or products. This is not exclusively so, but quite common. Both types of contracts are legally binding.

What is a Zero-hours Contract?

Zero-hours contracts are used for employees not guaranteed a minimum number of working hours.

Much of the work that these types of employment contracts are used for is only needed sporadically. It is often thought of as an “on-call” type of position. These contracts give employers flexibility, but employees may experience uncertainty regarding their income and work schedule.

Key provisions that employees should look for in a zero-hours contract include:

Terms for scheduling work
Terms for canceling work
Pay and benefits
Conditions of termination

Individuals who enter into a zero-hours contract should be very clear on its provisions prior to signing.

What is an At-will Contract?

At-will contracts are used for employees who do not have a fixed-term contract and can be terminated by either party at any time, for any reason, with or without notice.

Key provisions to look for in an at-will contract include:

Terms for termination
Conditions for severance pay

An at-will employment contract does not give employees many protections. They may include salary and benefits, but they rarely include information concerning any specific duration of employment or guaranteed employee rights. It could be attractive in certain circumstances where you would want the freedom to quit anytime, but it sets the stage for employers to potentially mistreat you or fire you unexpectedly when you rely on that income.

When to Contact an Attorney

There are many different types of employment contracts, and each has its own rules.

This can be a lot of information to keep track of, but an employment lawyer can help if you feel your rights are being infringed upon.

The attorneys at Wenzel Fenton Cabassa, P.A. are experienced in the different types of employment contracts and non-disclosure agreements. Many employment contracts and provisions are often too overreaching. Some can even be deliberately misleading.

If you feel your rights may have been violated, consult an attorney regarding your employment contract.

* Free Case Evaluation not available for Employment Contract and Agreement consultations.

Please Note: At the time this article was written, the information contained within it was current based on the prevailing law at the time. Laws and precedents are subject to change, so this information may not be up to date. Always speak with a law firm regarding any legal situation to get the most current information available.