Contracts of Permanent Employment
Permanent employment contracts are exactly what it sounds like: they are the employment agreements that will last until the termination of the employee or until the business is closed through bankruptcy or otherwise.
In circumstances when an employee leaves with proper notice, he or she can expect to be rehired in the future, because the contract ensures that there is technically no reason the new job offer wouldn’t be accepted.
During the period of the contract, which usually involves a set salary, benefits and other advantages, the employee has some job security that a contract worker would not have . The benefits package is normally comprehensive. Employees under permanent employment contracts can expect things such as:
Industries where you will typically find permanent employment contracts include manufacturing, civil service and professional positions. Although permanent employment contracts may seem like the most beneficial to employees (which they are to a certain extent), keep in mind that industries do not have to provide permanent employment contracts to employees. This is a privilege, not a right, and when hiring staff, some companies will want to offer contracts with a fixed amount of time remaining, such as temporary contracts.
Contracts of Fixed-Term Employment
Employers and businesses need to be wary of how much time off work can be given to employees and not just for the purposes of injury, sickness or emergency. This blog post will look at the 4 types of employment contracts available to business owners and employers and in this blog post, we will look at Fixed-Term Employment Contracts.
What is a fixed term employment contract? Fixed term employment contracts are limited to a certain period of time as agreed upon by the Employer and the Employee in writing. In the agreement, the parties must agree upon the precise duration of the term. In the absence of a specified term, the employee will be deemed to have an indefinite term of employment with the employer.
Typical fixed-term employment contract duration The duration of the employment term must be specified in the agreement and so the duration can be for anything from 1 month to 3 years.
Why use a fixed-term contract? Fixed term employment contracts allow businesses to hire employees to fill a specific role for a set period of time. This can be beneficial for businesses who are undertaking short-term projects and have additional capital to bring on an extra employee. By entering into a fixed term employment contract businesses can also ensure that they are not liable to pay redundancy, if the employee fixed-term contract comes to an end.
Is a fixed-term employment contract a good thing for my business? Having a fixed term employment contract can be beneficial for a business but it may not be advisable for a small business if the business will still require the employee at the end of the fixed term. If the employer continues to employ the employee after the end of the fixed term, and does not enter into a new written fixed term employment contract, the existing employment relationship may be converted to permanent employment.
If the employee decides to leave the business during the course of a fixed term employment contract, the business is not required to give the employee any notice and they are therefore free to find new employment without being encumbered by giving the notice period in the employment contract.
Is a fixed-term employment contract a good thing for my employee? A fixed term employment contract can be a good thing for the employee as the employee will often be paid a higher rate of pay than for a permanent employee. However, because the employee knows when their employment will end, it can be very difficult for them to find a new position before the fixed term ends. For example, if the employee is offered a new job, they will have to decide between resigning and ensuring that they start immediately or giving their notice period which could risk the loss of that new opportunity. Further, the employee may be required to sacrifice their current job for the superior opportunity only to later find out that the new job did not work out and they are left unemployed after the fixed term employment contract for the previous job has ended.
In order to keep the employee for a longer term, the business could negotiate a new contract with the employee whereby they agree to become a permanent employee with the business.
Contracts of Casual Employment
Casual employment contracts are defined as the arrangement where the employer engages the employee without any firm commitment in the form of continuing or regular work. This could also mean that the employee has set hours of work with other alternative casual employers which would make it possible for them to reject the offer when it is made.
Although the employee may learn about their work schedule in advance, there is no guarantee that the employer will provide them with work even if that schedule has been shared in advance.
A 2018 report issued by the Fair Work Commission stated that casual employment contracts accounted for more than 20% of the total workforce in Australia. The three (3) most common industries employing casual employees were hospitality (for 52% of such employees), and retail and accommodation (both at 41%). A retained rate of 36% of casual employees worked in the health care and social assistance sector with educational and training sector following at 31%. The recreation division came next at 28% while professional, scientific and technical services was at 23%.
Many in the Australian workforce enjoy the level of flexibility that casual employment contracts provide. This is despite not having the same security as regular, ongoing employment contracts. Under the National Employment Standards, casual employees are not entitled to long service leave. They also won’t receive notice of termination and are not protected from unfair dismissal from their employer.
Casual employees do have a number of rights under the Fair Work Act. For instance, casual employees who work for the same employer on a regular and systematic basis for over 12 months or who have a reasonable expectation of further work as set out by their roster may qualify for permanent or ongoing employment with the company.
Indemnity and Work Cover insurance is vital for casual employment contracts and the employee is also encouraged to take out their own personal injury insurance coverage in addition to this.
Casual employees do not usually get the same benefits from their employer as part-time or full-time employees. However, there are exceptions to this with some casual owners or managers more than willing to extend certain perks such as annual leave payments or sick leave from an eligible period.
Contracts of Zero-Hour Employment
Zero-hour contracts are an increasingly common form of employment, in which the employer offers a worker only a set number of hours on an ‘as-and-when’ basis. This means the worker has to wait until the employer determines whether they need their services, sometimes at very short notice. In this respect, zero-hour employment contracts are not dissimilar from freelance work, except that the worker is still technically regarded as being employed by the company.
Often referred to as "the worst of all worlds", zero-hour contracts strike many commentators as an unsatisfactory solution to the issue of temporary work . While employers get the flexibility they desire, employees’ ability to earn an income can be drastically affected if their services are not required for a period of time, and the instability of relying on future work and income can make it difficult to plan. Even the early days of UK government regulation of the zero-hours industry have been controversial, with many employers and companies taking issue with documentation around zero-hour work being significantly more content-heavy than information around fixed-term contracts or part-time work.
Anyway, the main job law aspect that Employers should be conscious of is that they Cannot penalise someone who is unable to respond or is otherwise engaged at the time that work is offered.
Selecting the Correct Contract
When deciding on the appropriate type of employment contract for your business or your own career, there are several factors to consider. These can all be broadly classified as either legal, financial or personal.
Business needs Many business owners have a vision when it comes to the specific contract that the person who is engaged to work in their business should have. This could be because the role of the person is permanent and for a long career, or the business owner may only need the services of the person for the short to medium term to assist in growing the business. Sometimes the nature of the work that is being performed lends itself to an employer engaging the person as an employee or a contractor. Likewise, the on-going workforce requirements of a business may be able to be met through a mix of full time and part time employees and casuals or by engaging contractors. The skills and services of contractors are often required to manage a specific project or pool those skills with other contractors to provide a service to a third party client. By contrast, an employee is a business’ most valuable asset and is generally more expensive and less flexible to engage. Having said that, it is necessary to guard against the temptation to hire employees on a permanent basis where this is not necessary. Entering into a fixed term contract or a labour hire agreement can easily control this risk.
Personal circumstances Front loading the term or type of contract on offer can have a significant impact on a person’s willingness to accept an offer of employment or increase the likelihood of them staying longer in the business. For instance, a full time employee may be more likely to sign up to being an employee who is only required to work for 38 hours week as opposed to being hired as a contractor who must work "as required". In the case of a person looking to move from employment to contracting or self-employment, a permanent contract with an ongoing Consultative Committee may be more attractive than the offer of a contract to perform the same work as a contractor. Where a tradesperson is being offered an apprenticeship with full completion benefits, this can be the difference between their doing so or not.
Financial impact The financial impact of the employment contract must also be carefully considered. An employee will generally be more financially costly for a business than a contractor and the staff on-costs that attend an employee being offered full-time work can push the rates beyond those that would be acceptable if the worker was engaged as a contractor. Is the responsibility of the recruitment process at odds with your business model or allows you to avoid the costs of engaging contractors? On the flipside however, the freedom that a contractor has could require an employee to be involved in parts of a business that seem to be outside the area of their expertise. A contractor who "does their own thing when it comes to invoicing" could be more cost effective in the short term in some circumstances, but it’s important to remember that having the contractor inside the business (and on an employee’s rate) could avoid this cost down the track.
Legal obligations In many ways the legal obligations of both a business and a person looking for work should be the last consideration. This is because it is usually a piece of paper that is only drawn up after the parties have committed to working for each other and at which point the position has been established on an operational level. However, legal obligations can also be the most restrictive in terms of the future of the relationship. If a person has signed a contract to perform a certain job or role at an agreed hourly or annual rate, it can be difficult (not just practically but in terms of the law) for the relationship to be changed significantly without going through a proper process. In addition, the contract may contain legal obligations that dictate exactly what sort of work or tasks the employee or contractor can do. Having a contract drawn up that reflects the work that the person is doing is therefore important and should occur prior to or at the time of the offer.
Legal Risks and Considerations
Navigating the legal landscape is critical for both parties in an employment contract. Many countries have established labor laws that regulate minimum standards, workplace safety, and worker rights. Employers must be compliant with such regulations, and may find that contracts may need to be amended or adjusted to come into compliance.
On the flipside, it’s important that the employee understands their rights under applicable labor laws, even beyond what may be stated in an employment contract. For example, many jurisdictions make it illegal for an employer to discriminate against an employee because of their age . While it may be legal to include an arbitrary retirement age in an employment agreement, even if follows the age laws, the law may still find it to be discriminatory to include a retirement age of 65 in the contract for a 45 year old.
On both sides, dispute resolution mechanisms and applicable labor courts or alternative dispute resolution mechanisms, like arbitration or mediation, should be outlined in an employment contract. Most countries have designated labor courts for labor law disputes. While many arbitration clauses are enforceable in employment contracts, a factor like the location of the arbitration or any statutory exclusions must be taken into account when including an arbitration clause.