11 Types of UK Employment Contract

It can be overwhelming for SMEs and startups to lay down legally sound employment contracts while still getting the business up and running. At Docue we understand this more than any firm out there which is why we introduced a seamless online legal service to help you draft, sign, manage and secure important legal documents like employment contracts. In this article, we will be taking you through the different types of employment contracts, contract details, and why they are so important.

What is an employment contract?

This is any written document outlining the terms of employment from an employer to an employee. Once signed, both parties are legally bound by the terms set out in the contract. Since employment contracts are considered legal documents, we always advise our clients to carefully draft their employment contracts, or else, they end up with legal loopholes that may eventually be exploited.

Main terms of any employment contract

Docue handles all types of contracts on behalf of thousands of clients. No matter how different they may appear to be, they must cover the following main terms.

1. Salary/ Wages/ Compensation

These are the details of the employee’s salary or wage for a set duration and circumstances under which their salary or wages may be revised upwards or downwards.

2. Confidentiality Clause

This is a key feature of an employment contract that employers use to keep employees from intentionally disclosing trade secrets or important company data. It is also called a non-disclosure agreement.

3. Responsibilities

This is the general framework outlining the tasks or responsibilities of the employee to the company.

4. Contract duration

This specifies the length of time the employee is expected or agrees to work with the organisation or company. Depending on the type of contract, which we will discuss later, the contract duration could be set for a specific period of time or set as “ongoing”. The contract should also set out the applicable notice periods for bringing the contract to an end.

5. Schedule

Basically, this specifies the number of days and hours an employee is expected to work.

6. Other benefits

In addition to salaries and wages, employment contracts contain the details of other benefits an employee may be entitled to during the contract. These include but are not limited to holiday entitlement, pensions, allowances, health cover, and severance package among others.

7. Non-compete Clause

This is not included in all employment contracts but can still be very important. It limits an employer from starting a similar business to that of the employer or working for a competing company for a specific duration after the termination or expiry of an employment contract.

Types of Employment Contracts

In the United Kingdom, there are eleven main types of employment contracts. These contracts do not vary that much in regards to the main terms of an employment contract (see section above), but they do vary greatly in terms of the length of time the contract lasts. These employment contracts are:

1. Fixed term contract

It is one of the most common employment contracts today. A fixed-term employment contract usually lasts for a specific and pre-determined length of time. As an employer, we would recommend the fixed-term contract when you are taking on large projects like research or a census exercise. Some of the main features or terms in a fixed-term contract include;

It runs for a specific mutually agreed upon length of time.

The contract may or may not be renewed after expiry.

Payment is non-negotiable and may be issued in advance.

You must still give fixed term employees access to the same benefits as permanent employees.

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2. Permanent employment contracts

These are employment contracts that may extend for an indefinite length of time. Here the employee works regular schedules and receives payment according to the prevailing hourly rates or on a salaried basis. Often, payment is due monthly . A permanent employment contract is popular due to a number of reasons;

The contract is valid for an indefinite length of time.

The salary, benefits, and terms of termination are clearly stated in the contract.

From an employees perspective, it offers room for career growth and development through training or promotions.

Even though it may seem it is long-term employment, there are certain provisions that may warrant a permanent employment contract to come to an end. This includes;

If an employee willingly resigns from the job.

If an employee attains the legal retirement age limit.

If there is a gross violation of the terms of employment by an employee.

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3. Casual employment contracts

Just as the name suggests, a casual contract is an unregulated work arrangement between an employee and an employer. In a casual employment contract, an employee is expected to work as and when called upon by the employer. It is often in anticipation of work that needs to be done, or when the work needs to be done quickly. Take for instance a babysitter who only gets called in when the employer is likely to work late or has an emergency.

Usually, there are no specified hours or working schedules in a casual employment contract. The employer is not legally bound or obligated to provide work to the employee at all times. In the same way, the employee is not legally obligated to accept the work offered by the employer. For this reason, there is no formal provision for dismissal from work, no work equals dismissal!

4. Zero Hours Contracts

This is a part-time employment contract but with zero guaranteed payable working hours. Unlike the casual employment contract, the employer may take punitive action against an employee for turning down work when called upon.

In a Zero Hours Contract, there are no employment benefits, the working hours are unregulated and unpredictable and the salaries or wages are often calculated as per the national minimum wage..

5. Full-time or part-time contract for an indefinite period

This type of contract is based on mutually agreed upon paid working hours between an employer and an employee.

6. Agency staff or temporary employment contract

It is also referred to as an interim employment contract. This type of contract offers a temporary employment framework, between two different companies or employees. We would recommend this contract to companies that are experimenting with a new line of work or production or need to temporarily fill a position. Depending on the outcome, this contract may lead to a permanent or full-term contract and after 12 weeks agency workers are generally entitled to the same benefits as permanent employees

7. Self-employment contract

This type of employment contract is very useful for tax purposes. Remember, as a self-employed citizen you still have to remit and file self-employment taxes. If you provide contract services to other businesses, you must sign a self-employment contract provided by the business utilising your independent services. Usually, a self-employment contract is short-term and the completion of the service signifies the end of the contract. Also, the scope of the task has to be outlined in the contract.

8. Junior Employee Contract

This employment contract covers a working arrangement or agreement between an employer and a junior employee. It is legally binding for both an employer and junior or entry-level employees which makes it an ideal contract for apprentices and interns. It specifies the responsibilities, working schedule as well as wages of junior employees.

9. Consultancy Agreement

This is a contract that provides a framework for a relationship between a consultant and a client. The client drafts the agreement and presents it to a consultant. If the service fee is agreeable by both parties, the services of a consultant are utilised in the client’s project.

10. Freelance contract

If you are thinking of engaging the services of a freelancer for a business project or task, then, this is just the legal document you will be looking for.

A freelance contract provides a definite timeline for the completion of tasks, specifies the agreed mode of payment after the delivery of services, and may state the extent or duration of the services to be provided, and details of the project. A freelance contract is a legally binding document that is often used to demand payment for services rendered by the freelancer, or in demand refunds for services not rendered by the freelancer.

11. Non-compete and confidentiality contracts

In some instances, non-compete and confidentiality are simply clauses within a larger contract document.

Confidentiality contract- this is an agreement between the employer and the employee that prohibits employees from disclosing any privileged piece of information concerning their business that they may come across while in the line of duty.

Non-compete agreements – These are contracts in which the employee agrees not to unfairly compete against his/her (former) employer. For example, a non-compete contract may prohibit an employee from working for a competing company or forming a competing company within a certain geographical area for a specified time frame.

These two contracts are not only legally binding but also outline the consequences each party may face as a result of a contract breach. While a non-compete contract may run for a specific length of time, a confidentiality contract usually runs indefinitely. Remember, there is no exchange of economic value or benefits. An employer is not legally obligated to pay the employee for abiding by the contract.

How can Docue help with employment contracts?

At Docue we provide an all-in-one platform for the preparation, management, and secure storage of all your legal documents including employment contract templates.

If you are a startup or SME struggling to draft a reasonable employment contract, Docue has you covered. We have several contract templates that are constantly revised by a team of legal minds to accommodate all new provisions of the law. Docue can help you customise the employment contract templates to fit the needs of your business without having to draft it all by yourself.

How fast can I draft employment contracts with Docue?

Drafting an employment contract with Docue only takes a couple of minutes. We have the contract template in place so all it takes is a little bit of customisation and you are done!

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Get employment contracts drafted by real lawyers with Docue

As an employer, you don’t want a contract with shallow clauses that may be manipulated to your disadvantage. At the same time, we ensure that your employees are not getting the short end of the stick. When it comes to employment contracts, we provide guidance notes throughout to help you with the drafting process.

You can sign up with Docue and experience real-time expert drafting of all your contracts. Our e-signature feature allows you to append your signature to a legal document in a fast safe and convenient manner.

How are contracts of employment offered?

Employment contracts are offered from an employer to a potential employee through a formal job offer letter. Whether or not the potential employee accepts the offer presented depends on how well it has been packaged.

The contents of an offer letter may include:

Job description – the details of the task an employee is required to cover in a given length of time.

Salary – Compensation for work done and the benefits for that position of employment.

Reporting date - this is the day when your employee officially starts working.

When should an employment contract be issued and when does it start?

An employment contract should be provided to an employee on or before his or her first day of employment.

Why else would you need written employment contracts?

Legally, all employers are required to have employment contracts for all their employees. At Docue we insist on written contracts because:

Written employment contracts are legally binding. Neither the employer nor the employee terminates the terms of the agreement without legal consequences.

Written contracts provide a point of reference whenever there is a dispute between an employer and employee.

They provide security for investments. Companies spend lots of money and time on advertising and training employees for certain positions. A written contract is a guarantee that the employee cannot start a similar business with the knowledge acquired and neither can they join a company with similar or competing interests to yours.

Final thoughts

Digitalisation and automation of employment contract drafting and management is the way to go. Docue is the first important stepping stone towards this direction. If you want to make a great decision for your startup or SME in terms of legally binding contracts, and professionally prepared documents give Docue a try.

We designed the platform to give you a centralised, organised, and professional solution that will help you grow your business, at a very affordable cost. It is time to make that digital move and we will walk you through the light.

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