Companies often require new hires to sign contracts detailing the terms of their employment. While nearly all contracts of employment help document the specifics of an employment relationship, there are many types of contracts that employers can offer their new employees. The type of contract offered depends on the employee's status, the organization's needs and other factors. In this article, we outline the three primary forms of contracts and 10 different types of employment contracts to help you better understand any agreement extended to you during the hiring process.
What is an employment contract?
An employment contract is an agreement issued during the hiring or renewal process that establishes the terms of your work relationship as an employee at a new organization. Typically, if the contract is a written document, both you and your employer sign it to signify your agreement. Contracts usually detail the rights and responsibilities of both parties, and organizations commonly use them to help all parties involved understand their obligations throughout the term of a new hire's employment. Here are a few things that may be explained in a contract:
- Salary information
- Duration of employment
- Medical insurance
- Dental insurance
- Paid time off (PTO) policy
- Sick leave policy
- Retirement plans
- Non-compete clauses
- Conflict resolution protocol
- Employment conclusion details
Typically, contracts are specific documents drafted by legal professionals to outline the binding particularities of your employment arrangement—in most cases, these particularities include specific start dates and provisions for the end of your employment. However, in some situations, your new employer may not require you to sign a physical contract, depending on your employment status or the form of contract they offer you. Regardless of the situation, when you're hired, it's common to discuss the terms of your employment on record to ensure both parties agree on the same protections and stipulations.
Related: 15 Tips for Negotiating a Contract
How are contracts of employment offered?
Contracts can be offered in multiple forms, depending on how you and your employer reach an agreement. While many think of contracts as documents to be signed and processed, that isn't always the case—contracts can be offered through conversation or implicit messaging as well. Here are the three most common forms that are used to offer contracts:
A written contract is one of the most common forms of employment contracts. Written contracts explain your employment relationship's specific details, including your salary, schedule, employment duration, PTO policies, benefits eligibility and more. Written contracts are popular because they can fully and legally document an employment agreement that both employers and employees explicitly sign. This means that if any discrepancies occur during your employment period, you can return to your contract to reread it and clarify any questions or concerns that arise.
A verbal contract is a non-written employment agreement. Often, a verbal contract is extended during a discussion about the particularities of your employment relationship. A hiring manager may verbally offer you a position with a set salary, benefits and other terms. If you agree to these terms verbally, this discussion can serve as a legal employment contract, especially if another witness is present to testify to the agreement being made. However, verbal contracts can be challenging to uphold, considering there is typically no accompanying written document that establishes specific terms.
Implied contracts are both non-written and non-verbal employment agreements. Usually, the use of implied contracts occurs in the absence of a verbal or written contract. If you and your employer do not agree to specific terms through a discussion or by signing a document, but you still begin to work for them in some capacity, you may have an implied contract. Implied contracts allow employees to assume that an employer may afford them the same rights, protections and benefits as previously established by an employer's actions or guidelines.
For instance, if your employer does not explicitly state how long your employment will last but has previously said in a general context that most employees serve in their roles for one year at a time, it is implied that you may work in your position for one year as well. Like verbal contracts, implied contracts can be challenging to uphold, but they can serve as legal agreements in some contexts.
10 types of employment contracts
The type of contract you're offered in a new role is usually determined by factors like your status as an employee, an organization's needs and the type of work you perform in your role. Here are 10 types of contracts to look out for during the hiring process:
Full-time contracts are offered to permanent employees who work a full workweek, usually 35 hours or more. These contracts usually include information about benefits, paid holidays, vacation time, sick time and retirement plans. Even further, some full-time contracts present new employees with opportunities for other benefits, like professional development opportunities or workplace perks. Full-time contracts are almost always written contracts since they include many components, and employers normally want to be thorough and clear when offering such an extensive agreement.
Part-time contracts are extended to employees who work a reduced number of hours compared to full-time employees. Typically, part-time contracts are offered to those who serve less than 35 hours per week and often include some of the same stipulations and protections as full-time contracts. Many part-time schedules detail the employee's flexibilities, weekly schedule and rate of pay. However, it is important to note that part-time contracts usually do not include information regarding insurance, salary or PTO—all benefits typically reserved for full-time employees.
Zero-hour contracts are offered to employees who work irregularly or only when work is available. In zero-hour agreements, an employer agrees, in writing or verbally, that they will offer work when it is available, and an employee agrees to work such shifts or remain on call for availability purposes. Zero-hour contracts commonly specify that an employee will work a minimum amount of hours or shifts per month—a number set by the employer in most cases—and that the employee holds the right to refuse any work assignments that may be inopportune.
Zero-hour contracts are often used to hire temporary employees, such as day laborers or babysitters. Unlike full-time and part-time contracts, though, zero-hour contracts do not include information about the standard rate of pay, regular scheduling or benefits, as zero-hour employees are not typically offered such protections.
Casual contracts are usually extended to employees who work on a seasonal or temporary basis. Through casual contracts, employers typically outline that they will only pay employees for completed work and that the company isn't required to offer a minimum amount of shifts or work hours. In addition, such contracts sometimes state that employees are not mandated to take any shifts or work hours offered.
Casual contracts offer both employees and employers flexibility in their agreement. However, they are typically only used to specify short-term employment relationships that may or may not be renewed after the duration of employment expires.
A freelance contract is typically offered to an employee hired to complete a specific project, such as designing a website, writing an article, taking photos or doing home renovations. Freelance contracts outline the limitations of hours, project details, salary and payment terms. These contracts protect freelancers from receiving late payments or from any project-related challenges that may occur. Freelance contracts do not often include information about benefits like insurance or PTO, as freelancers are usually considered self-employed and sometimes even work other full-time jobs.
Union contracts are standardized legal agreements typically offered to those who join a local or nationwide union of workers. These contracts are often provided to employees of specific trades who may work directly for the union itself or be contracted to work for a private company. While a private company may be hiring you and paying your salary, a union can provide employees with other contract items. Union contracts outline job descriptions, duties, vacation time, PTO, benefits and pension details. These contracts are highly beneficial to employees because they are specifically designed to advocate and protect employee rights.
When companies hire high-profile executives for upper management roles, they often extend executive contracts. These contracts, similar to full-time contracts, detail all of the traditional benefits, protections and perks afforded to an executive employee, but they may also include special incentive offers that can attract high-quality candidates. These incentives may include contract items like high salaries, severance packages and perks like a company car. It is also quite common for executive contracts to have very specific clauses about confidentiality and working in similar roles for competitors.
A fixed-term contract is a highly specific and written contract extended to employees who only work for a set amount of time or until they complete a specific task. Fixed-term contracts are commonplace for temporary or contract workers who may take over a job for a specified amount of time or help an organization fill a gap during a time of need.
Fixed-term employees often receive the same benefits and protections as other full-time or part-time employees during their employment tenure, which can be detailed in the contract. Additionally, many fixed-term contracts can lead to permanent contracts once they are up for renewal.
An at-will agreement is a type of employment agreement that may look like a contract but does not actually afford employees many protections. At-will agreements usually outline all of the same things that a contract does—employee benefits, salary, time off and more—but such agreements rarely specify the duration of employment or guaranteed rights. Because of this, at-will agreements allow employees to leave jobs whenever they'd like and give employers the ability to conclude their employment without reason, making such agreements a challenge to uphold in cases of potential discrepancy.
Related: What Is "At-Will" Employment?
Non-compete and confidentiality contracts
Employers establish non-compete contracts to prevent employees from working for competitors and protect a company's assets or confidential information from being shared with external parties. Non-compete contracts are often included as a part of a larger employment contract, but they may also be extended as standalone documents or verbal agreements. A common type of non-compete agreement is the non-disclosure agreement (NDA), which prevents employees from revealing confidential information that may be vital to a company's continued operations.