Understanding different types of Employment Contracts

by | Nov 24, 2021

Every employer has a responsibility to their staff. The terms of their employment dictate their rights, pay rate, taxes, duties, expectations, holidays, conditions at work, and more.

The particulars that define each employee’s role must be laid out in their employment contract, yet differing employment categories require different types of contracts.

As an employer, it’s your job to understand and deliver the correct contract for each employee, contractor, and even volunteer. Contracts are designed to include the reasonable expectations of the role and the fair treatment of your staff—protecting both employees and the company.

So, let’s get down to business:

What are the different types of employment contracts?

Full-time employment contracts

Permanent full-time employment is the most common type of contract in the UK. It implies that each worker will be hired to work a specific number of hours (typically 35+, yet there is no minimum set number) and are entitled to a range of benefits provided by the employer.

Both parties have the right to end the contract, working the allocated amount of notice for each situation: termination, redundancy, retirement, or when giving notice.

Employers must provide:

· A written contract or statement of employment

· The National Living Wage, National Minimum Wage or higher

· Payslips showing deductions of National Insurance contributions, student loan repayments, pension contributions, and tax payments

· Statutory levels of holiday pay

· Statutory Sick Pay

· Maternity, paternity, and adoption pay and leave

Employers must ensure:

· Employees do not work longer than the allowed maximum.

· Payment rates are fair and appropriate.

· They hold the correct liability insurance to cover their employees.

· The working environment is safe and secure.

· Payroll, tax, and NICs are registered with HM Revenue and Customs.

· Flexible working requests are given fair consideration.

· Discrimination in the workplace is not acceptable.

· The business premises are suitable for any disabled employees.

Part-time employment contracts

Part-time employment contracts are covered by the same rules and regulations as full-time contracts but the number of working hours required by the employer will be documented in the contract.

Part-time contracts are typically considered 20 hours or less, but there is no specific minimum or maximum number, only fewer than those of full-time roles.

The benefits of part-time employment include a more flexible schedule within a permanent position and greater freedom. Part-time workers are still available to work overtime where required.

Fixed-term employment contracts

A fixed-term employment contract holds the same benefits as a full or part-time contract but with a specific end-of-contract date agreed in advance. Fixed-term contracts end when either a predetermined task is completed, a specific event occurs, or the term reaches its completion date.

A fixed-term contract allows an employer to take on extra staff when the business needs them. For example, during busy periods, to fulfil substantial orders, fill seasonal roles, or cover maternity or long-term sickness.

Agency workers aren’t counted as fixed-term staff; neither are students and trainees on work experience. Other specified period contracts that aren’t considered fixed-term employees are apprentices and members of the armed forces.

Fixed-term employees are entitled to:

· Equal pay and conditions as permanent staff

· Equivalent benefits packages

· Information about permanent vacancies within the company or organisation

· Protection against redundancy or dismissal

· Equal redundancy rights after 2 years or more continual work

Fixed-term contracts can end early or be extended depending on the requirements of the employer. Under standard operation, no notice period needs to be given.

Where a contract isn’t renewed:

· Employees are entitled to redundancy rights after 2 years of continued service.

· They can apply for a written statement providing the reasons after completing a full year of service.

Where early termination occurs:

· The employer is in breach of contract if they can’t provide a good reason for the early exit.

· An appropriate term of notice must be set and worked. The minimum notice is 1 week for workers who have worked for at least 1 month, and 1 week for each year worked when workers have over 2-years of continual service.

· Employees must give the appropriate notice (1 week if they’ve worked over a month) when they choose to terminate the contract early.

Renewing a fixed-term contract

Employers and employees can negotiate renewals for further or extended terms or transition into full-time employment. However, if an agreement can’t be reached by the end of the original period, the employee may be able to claim unfair dismissal.

Fixed-term contracts that run for over 4 years automatically transition into full-time employment contracts unless the employer shows a good reason not to. However, the worker, the employer, and the union (or staff association) can agree to remove the right for the automatic change of category if they choose to do so.

Agency staff contracts

When an employer needs extra staff to cover temporary situations, they can consider fixed-term contracts or hiring staff through an agency.

Agency workers are still entitled to the same fair terms and conditions as other employees, but the payment and contract are made through the agency and not with the individual.

· The employer pays the agency, covering National Insurance contributions and Statutory Sick Pay.

· The agency is responsible for the worker’s rights.

· After 12 weeks’ continuous employment, agency workers are entitled to the same terms, conditions, and benefits as permanent employees. Such terms include pay, leave, working hours, rest periods, etc.

· Employers must provide the agency with the information they need to ensure their workers receive equal treatment to permanent employees.

· The employer is responsible for the health and safety of agency workers while carrying out their roles.

Freelancers, consultants, contractor, and self-employed contracts

Freelancers, consultants, contractors, and self-employed workers are usually responsible for their pay rates, tax, and National Insurance contributions, with each element covered by their contract.

They’re not typically entitled to the same benefits as permanent employees, but they are entitled to the same health and safety stipulations while carrying out their role.

Zero hours or casual contracts

Zero-hours contracts are for staff who are ‘on call’. Zero-hours contracts are also sometimes known as casual or piecework contracts.

Usually, a worker gets called up whenever the employer needs their service. There are no set hours, demands, or promises, and the worker can decline any request when asked. Zero-hours workers are entitled to seek alternative or additional employment wherever they choose; the employer has no right to make any demands on their time.

Employing family

Businesses need to pay attention to discrimination laws when employing family members.

When employing family members, employers must:

· Show no special treatment in terms of pay, promotions, benefits, or working conditions.

· Ensure the applicable tax and National Insurance contributions are paid.

· Follow regulations for younger family workers.

· Provide appropriate liability insurance.

· Deliver applicable workplace pension schemes.

Employing young people

There are specific rules for employing young people between the ages of 13 and 18-years-old, typically covering working hours and rates of pay.

There are exceptions to the age limit rule, where children under 13 are involved in television, theatre or modelling.

Young people’s employment rights:

· Statutory maternity pay and ordinary statutory paternity pay (when qualified through continuous employment)

· Paid time off for study and training

· Redundancy pay

· The applicable rate of the National Minimum Wage

Young people may only enter full-time employment on reaching school-leaving age. In England, a young person must be in part-time education or training until they are 18-years-old.

Employing volunteers

Volunteers aren’t entitled to payment but are entitled to the same health and safety practices as other staff and appropriate induction and training relative to the roles they undertake.

Employing interns

Interns can be volunteers, workers or employees. However, if they carry out a regular working role, they are entitled to many of the same working rights as employees, including the National Minimum Wage.

If students are required to complete an internship as part of their training, they’re treated the same way as volunteers and have no entitlement to payment.


An apprenticeship agreement is a specific type of employment contract. It outlines the aspects of the trade they’ll learn about, the skills they’ll acquire, and the amount of training allocated to their position.

Anyone over 16-years-old and not in full-time education can apply for an apprenticeship in the UK.

Setting up different types of employment contracts (UK)

When it comes to employment law and the provision of employment contracts, larger organisations will have dedicated HR departments taking care of business. However, many small businesses and SMEs will rely on outside services to manage those actions.

While we’ve done our utmost to answer the question ‘What are the types of employment contracts?’ it doesn’t cover what each needs to include or how to set them up. With any legal document, all businesses must follow the correct procedure to meet their requirements.

It’s crucial to ensure documents are legally correct, and with that in mind, an experienced legal adviser is the best option for you and your business. Here at LegalDrop, we’re here to help you find the ideal partner for your employment contracts or any other issue.

Let’s chat…

The above is intended as guidance only and does not substitute legal advice. Please browse our existing Employment Contract services or get in touch with LegalDrop via our contact page if you need assistance.

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