9 types of UK employment contract (and everything you need to know about them)

Types of Employment Contracts

In the UK, there are a number of different types of employment contracts to suit different employee roles and relationships. There are some key differences between these different types of contracts, so it's critical that you know which one is right for you.

The types of employment contracts are:

1. Fixed term employment contract

A fixed-term employment contract usually lasts for a specific and predetermined length of time. As an employer, you may use the fixed-term employment contract when you are taking on an employee for a specific and large project like research or a census exercise. Fixed term employment contracts are also often used to cover other employees, for example when they are on maternity leave or other long term leave.

Some of the main features or terms in a fixed term employment contract contract include:

• it runs for a specific mutually agreed upon length of time;

• the contract may or may not be renewed after expiry; and

• 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, and these should be set out in your fixed term employment contract.

Our dynamic template can be used to create your fixed term employment agreement - all you need to do is answer a series of simple questions and you’ll have a customised fixed term employment contract in no time.

2. Permanent employment contract

Unlike fixed term employment contracts, permanent employment contracts 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 permanent employment contract is valid and in force for an indefinite length of time (until either the employer or employee terminates it);

• the salary, benefits, and terms of termination are clearly stated in the permanent employment contract;

• from an employees perspective, it offers room for career growth and development through training or promotions (and there is no defined end date for the role);

• 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 could include:

  (i) if an employee willingly resigns from the job, by providing the specified period of notice;

  (ii) if an employee attains the legal retirement age limit; or

  (iii) if there is a gross violation of the terms of employment by an employee.

3. Casual employment contracts

Just as the name suggests, unlike a permanent employment contract or a fixed term employment contract, a casual contract is an unregulated work arrangement between an employee and an employer. It is sometimes known as a “zero hours” contract.

In casual contracts, 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. Full-time or part-time contract

This type of contract is based on mutually agreed upon paid working hours between an employer and an employee - it generally will include the same terms as a permanent employment contract or fixed term employment contract, depending on the length of contract the employee is being engaged on.

For more information about contracts for full-time and part-time employees, read these FAQs.

5. Agency staff contract

There may be times when your business looks to engage agency or temporary staff to fill temporary workload demands. Where this happens, the contracts needed will depend on the type of agency that is engaged to provide you with the workers:

• ​​Employment agency: An employment agency is an organisation that acts as an intermediary between candidates and the end employer, introducing them for the purpose of employment. The agency typically charges the employer a fee for the introduction or a commission based on the candidate’s salary. An employment agency may also provide other services, such as advice on career opportunities, training, and assistance with job applications. As the agency worker will be employed by the client, an employment contract should be put in place between the client and the worker - this will usually be a fixed term employment contract that has a short term duration; or

• Employment business: An employment business, on the other hand, provides temporary or contract staff to employers whereby the employment business is responsible for paying the candidate’s wages and providing other employment-related benefits. This means that the employment business typically contracts directly with the employer, who pays the business for the candidate’s services. The client will not contract with the worker, but rather the employment business providing those workers.

6. Director’s employment contract

An executive director will also be an employee of a business so an employment contract (also known as a director’s service agreement) will need to be put in place.

As the director will also have additional duties and responsibilities as a director of the company, it is important to include additional terms in the contract that relate to the role as director. The director’s contract will include key information, responsibilities, and rights between an appointed executive director and a company. It contains the key terms of what the director can expect from their role, and expressly appoints them to the board of directors.

Use Docue’s director’s service agreement for your director’s now.

7. Founders employment contract

Similar to the employment contract for a director, a founder of a company will need to have an employment contract that reflects the seniority of their role. This can also be known as a founder’s service agreement.

Docue’s founder’s service agreement can be easily customised to reflect your business by just answering a few simple questions.

8. Consultancy Agreement

There will be times when your business requires help on a particular project, but does not want to take on an employee to carry out that work. Instead, an independent contractor (known as a consultant) may be engaged to carry out that work for your business. This type of template is a contract that provides a framework for a relationship between a consultant and a client.

Our consultancy agreement template is dynamic, so it can be fully customised to any type of consultancy services.

9. 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 freelancer is an independent contractor engaged to provide specified work to your business, and is not an employee.

A freelance contract provides a definite timeline for the completion of tasks, specifies the agreed mode of payment after the delivery of services, and will state the extent or duration of the services to be provided, and details of the project. Docue’s freelance services contract can be fully customised to suit the services that the freelancer is being engaged to provide.

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 your employment contracts, Docue has you covered. Our employment contract template is 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.

Drafting an employment contract with Docue only takes a couple of minutes. Whether you need a fixed term employment contract or a director’s service contract, we have the contract templates in place so all it takes is a little bit of customisation and you are done!

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