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7 top employment contract types in the UK

Employment contract types are important when you’re considering taking on a new member of staff or need to overview your employee classification for tax purposes. See how PARiM can help UK-based businesses classify their workers in just mere minutes.

As a small or medium-sized business owner or an operations or HR manager in a larger organisation, the chances are that you’re considering taking on a new member of staff. Whether you’re trying to offload some of your responsibilities or you’re simply growing fast and need an extra pair of hands, you’ll most likely advertise for a new full-time or part-time member of staff to join the team. But did you know that you have other options and you don’t have to hire a permanent member of staff for your company?

Below, we’ve put together an overview of the various types of employment contracts in the UK, highlighting the benefits for both employees and - more importantly - employers…

Perhaps the most well-known employment contract is the full-time employment contract, and it’s a popular choice for companies looking to take on a permanent member of staff for a set number of hours per week. You’d be forgiven for thinking your staff need to work 40 hours per week to be considered full-time employees, but that’s actually not the case. Typically, full-time employees will work in your office, shop, or warehouse for the majority of the time your company is open to the public. This is great for public-facing and behind-closed-doors roles, as you’ll have someone on hand to deal with customers and manage the workload.

It goes without saying that full-time staff will likely get to grips with your business pretty quickly, and when trained effectively, can become an indispensable part of your team. When creating a contract, remember to include their hourly wage, holiday entitlements, as well as any parental leave and Statutory Sick Pay (SSP) agreements in line with government policy.

Part-time Contracts

Part-time contracts allow you to hire a member of staff for a set number of hours per week - typically less than a full-time worker. Although a part-timer might work 15 hours rather than 40, they’re still usually entitled to the same benefits such as sick pay, holidays, and SSP, although these figures are adjusted in accordance with their weekly hours and typical wage.

When writing a contract for a part-time employee, you should include the number of hours the staffer is expected to work, though remember that you can offer overtime when needed.

Some employees prefer part-time work to fit around their other commitments, such as being a mother or running their own business, and it allows you to take on a new member of staff if you’re looking for additional support during busy periods, such as at lunchtime at a cafe.

Fixed-term Contracts

Many businesses hire employees on fixed-term contracts, where they outline a start date and an end date before they commence their work. Some fixed-term contracts don’t include an end date, especially if it’s project-based, such as working on a building site where they need to hire a member of staff for the duration of construction. It’s important to note that, as an employer, you must still give fixed-term employees access to the same benefits as your permanent employees, like holiday pay and sick pay, so bear this in mind before hiring them.

Agency Staff

If you’re looking to temporarily fill a position or you’re working on a project that needs more manpower, you may turn to agency staff, whose contracts will be managed by a recruitment agency rather than you. These staffers usually work on a temporary or open-ended basis, and the best part is that the agency will be responsible for a large part of the process - including, you’ve guessed it, recruitment. However, as an employer, you’re still responsible for their National Insurance contributions and their sick pay, and after 12 weeks of working in the role, agency workers are entitled to the same protections as permanent employees.

Why hire agency staff? They allow you to fill a position quickly and find an expert in your niche, rather than having to go through the process of training up a new recruit. Bear in mind, however, that they’re often more expensive per hour, as the recruitment agency must take a cut, so should only be used where necessary - and for short periods of time.

Freelancers, Consultants, Contractors

Other employment types to consider when taking on staff are freelance or contractor roles. Such contracts vary from role to role and person to person, but it’s important to note that staff are considered to be self-employed, and therefore are responsible for their own tax, National Insurance, and healthcare - which lowers costs and reduces liability. You can take on a freelancer to work on a contract or one-off project, or they can be hired on a permanent basis for a set number of hours or responsibilities per month, affording you some flexibility.

The benefits? You get to work with an expert on an hourly or pre-agreed price, without the burden of signing them up as a permanent employee. The drawbacks? They choose their own schedule, turn down jobs if they’re too busy, and raise prices whenever they want to.

Zero-hours Contracts

Zero hour contracts have been criticised in the press recently, as in some circumstances, can leave employees out of pocket or without an income at all. In truth, they’re great news for employers, as they give you ultimate flexibility - but you should use them with caution. Under a zero-hours contract, you can request employees to work with a day or two’s notice, and then not require their services for another week. The benefit is that you don’t have to pay staff when you’re not busy, but the drawback is that such contracts can lower staff morale and discourage talent from applying for such roles in the first place, so be mindful.

Volunteers and Young People

Finally, let’s touch on volunteers. Though they’re not paid, contracts can be used to set out your company’s commitment to your volunteers, and outline their role and responsibilities. Your contract might touch on reimbursing expenses, offering training and development, and following health and safety practices. It’s a great way to mitigate risk and build a professional working relationship with your volunteers, whether you’re a charity or for-profit organisation.

Young people, on the other hand, should also be taken into consideration when creating employment contracts. Young people must be given at least two consecutive days off per week, and receive a rest break of 12 hours. They must also be given a 30-minute break if they work for more than four and a half hours, and work no longer than 8 hours per day. Consult your human resources specialist when creating an employment contract for a young person and consider your legal duties and responsibilities when hiring anyone under 18.

When it comes to hiring employees, there are no right or wrong answers when deciding on the most appropriate employment contract. Consider your needs as a business and the needs of your employees, and write a comprehensive contract that will benefit both parties.

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