Different types of employment contracts

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Types of employment contracts

As an employer, the tax and employment responsibilities you have for your staff will depend on the type of contract you give them and their employment status.

A contract of employment is an agreement between an employer and employee and is the basis of the employment relationship.

Full time contracts:
Full time contracts are usually the most common type of contract. This type of contract can be based upon the employee being paid hourly or salaried and should set out the employees working hours, holiday entitlements, position within the organisation, pension benefits, parental leave allowances, and details on Statutory Sick Pay (SSP).
There is no set minimum number of hours that you must work on a full-time contract. However, most employers recognise full-time work as between 35 and 45 hours per week.

Part time contracts:
An employee’s part time contract generally contains much of the same information as the full time contract of an employee, the only difference being that part time employees work fewer hours.
As an employer you should pay particular attention to the employee’s pay and holiday entitlement in relation to the hours worked. It is also important to ensure that the holiday entitlement for part-time employees is clearly and accurately reflected in the contract and meets the relevant statutory requirements.

Fixed term contracts:
These contracts last for a specific amount of time which is set in advance.  The contract ends when the agreed contract period ends. In some cases, there are not exact timeframes, but instead the contract ends when a specific task or project is completed.
It is important to note that fixed-term employees must receive the same treatment as full-time permanent staff.

Agency staff:
As an employer you can hire staff through agencies.  These agencies will be either recruitment or employment agencies and will manage the contract of employment.
Agency workers usually work on a temporary basis. The length of their contract will depend on demand from the employer, as well as on their availability.
It will be the agency’s responsibility to make sure their employees’ rights are protected. However, NI contributions and Statutory Sick Pay will be paid by the employer to the agency they work for.
After 12 weeks’ continuous employment in the same role, agency workers acquire the same terms and conditions as permanent employees. This includes pay, working time, rest periods, night work, breaks and annual leave.

Freelancer, contractors and consultants:
Freelancer, contractors and consultants are generally assumed to be self-employed. As such they often look after their own tax and National Insurance contributions (NICs).
Freelance and contract workers may also not be entitled to the same rights as more permanent members of staff. They do get to manage their own schedule, and negotiate their own terms. As an employer, you are still responsible for their health and safety.

Zero hour contracts:
Also known as casual contracts, zero hour contracts are usually used for ‘piece work’ or ‘on call’ work, eg interpreters.
The employer is under no obligation to provide a set amount of hours to work. And, equally, the employee does not have to accept any work that is offered to them.
Zero hour workers are, however, entitled to the same annual leave as permanent workers. Their employer must pay them at least the National Minimum Wage to work. As an employer, you are responsible for their health and safety.
If they wish to, zero hour workers can seek employment elsewhere. There is nothing stop a zero hours worker from getting work elsewhere. The law says they can ignore a clause in their contract if it bans them from either looking for work or accepting an offer from another employer.
Further guidance can be found here

Disclaimer: this article is only intended as an overview of the legislation. You must always check directly with HMRC, ACAS or your own legal consultant for further information.