Types of employment contracts

Each type of employment engagement has different benefits and consequences.

The best way to engage workers in a way that's right for your business will depend on your specific business needs. You should also consider the industry standards of each role and how the arrangement will affect your business financially.

Once you’ve determined the best way to engage your workers, employment contracts can help you enforce and inform the terms of the employment relationship.

In this article, we’re breaking down the different types of employment contracts you may need depending on the types of workers your business needs.

Full-time employment contracts

Full-time employees have ongoing employment and generally work 38 ordinary hours per week or an average of 38 ordinary hours a week. This may vary depending on whether the employee is covered by an industrial instrument.

Employees under full-time employment contracts are entitled to paid leave and must be given notice of termination.

Part-time employment contracts

Part-time employees have ongoing employment and typically work less than 38 hours a week.

They usually work regular hours each week and are entitled to the same minimum employment entitlements as full-time staff. However, their part-time entitlements are on a ‘pro rata’ basis.

Casual employment contracts

Casual employees will work for you on a demand-only basis. Unlike a permanent agreement, casual employees have no set-in-stone commitment to ongoing employment and generally work on an ad hoc basis, which means their working hours are irregular.

Casual employees are paid for the hours they work, and they can refuse shifts.

They are also not entitled to paid sick leave or annual leave, and their employment can generally be terminated at any time without notice. To compensate, casual employment attracts an hourly loading.

Fixed-term employment contracts

This is when an employee is hired for a specified period of time or to complete a specific task or project. Typically, these contracts end either when a project is completed or when an event has passed. Fixed-term contracts clearly outline the length of the employee's employment period from start to end.

Although this type of employment arrangement is often short-term, fixed-term workers still receive the same financial and other entitlements as permanent employees. Although they don't require notice if their employment contract ends with their fixed term.

Contracts for independent contractors

Independent contractors are typically self-employed workers who contract their services out to other companies. Contractors negotiate their own financial compensation and working arrangements. Plus, they have the freedom to work for multiple employers at once.

It’s important for you as an employer to clearly define whether your new hire is a permanent employee or an independent contractor as there may be business risks if your contractor turns out to be an employee.

Written contracts vs. verbal contracts

It is best practice to have a written contract of employment signed by witnesses, even though the law accepts a verbal contract as legally enforceable too.

Some awards do require you to tell employees in writing about things like their status of employment or hours of work. In these cases, a written contract may work best for you to prove that you've met your legal obligations.

Verbal contracts are a lot harder than written contracts to pin down, for obvious reasons.

That's why verbal contracts often only work in the event that no disputes—financial or otherwise—occur and both parties have a mutual understanding of what they agreed on.

Many verbal contracts are only partly confined to a verbal dialogue between one party and the other party. There may still be supporting paperwork to prove the existence of verbal contracts like emails.

Changing the terms of employment contracts

Employment contracts can be varied and altered upon agreement. This is usually done through a formal letter of variation, which outlines the changes to the terms and conditions or the provision of a new contract to supersede the old contract.

It's important that your employees sign off on the changes to the terms and conditions and that consideration is applied when you add new employee obligations.

Getting the terms of your employment contracts right

Your employment contracts set the tone for your new employees. And you want to make sure that you're making the right moves to attract the best talent and doing right by your current employees.

BrightHR helps you hit all the notes by giving you access to a 24/7 team of employment relations advisers.

So, whenever you hit a snag with a written contract or have difficulties with other terms you may want to include in your contracts, you can call us for instant answers to your questions.