5 Main Types of Employment Contracts and Employment Law Around the World

June 30, 2022

7 min read

An employment contract is a legal relationship that establishes the conditions, duties, rights, and responsibilities of employment between an employer and an employee. It has terms that are legally enforceable whether written down or not – for example, the obligation of the employer to pay wages to the employee.

Depending on the person’s employment status, there are a number of different contracts available. As a result, it’s critical to correctly determine the employee’s employment status before creating an employment contract.

Types of employment contracts

Employment agreements can have varying advantages and drawbacks, and it is usually preferable to write them down beforehand.

Here are five of the most widespread employment contracts used worldwide:

Fixed-term employment contract

Fixed-term is when a person is hired for a specific length of time to do a certain activity or to complete a particular project. This employment type defines beforehand how long the employment period will last. The typical contract lasts until the project is finished or an event like peak season ends. Fixed-term is usually a temporary job; however, employees with this contract are entitled to the same benefits as permanent workers without having to give notice if their employment contract ends as planned.

Full-time employment contract

On average, employees who work full-time are defined as people who have a regular job and work at least 38 hours per week. This might differ depending on whether the employee is covered by an industrial instrument. They get paid time off and must be given notice if terminated.

Part-time employment contract

A permanent employment agreement, like full-time, but with fewer working hours. Part-time staff is typically employed for 20 to 29 hours per week and receives the same basic employment rights as full-time employees. Benefits for this type of employment, on the other hand, are calculated correlatively.

Independent contractor 

Contractors are freelancers who provide their services to other organizations. They set their own fees and working conditions, and they may work for several businesses at the same time. It’s critical to clearly distinguish whether someone is a permanent employee or an independent contractor since there may be legal ramifications if he or she turns out to be an employee.

This type of employment is rapidly gaining popularity. According to McKinsey, approximately 162 million workers in the US and Europe chose such flexible employment, and 44% of them have freelanced as their main source of revenue.

Casual employment contract

A casual employment agreement is great for situations where you want someone to work for you but are unsure how many working hours you’ll be able to give them, and where you can’t promise a daily working routine. The minimum number of hours that you anticipate them to work each week should be outlined in the contract, with the possibility being that their working pattern and hours mentioned above can change.

Employment contracts around the world

Despite some variations, the study discovered that in many parts of the world, there are similar labor regulation norms. Different principles are dependent on a country’s cultural, economic, and demographic levels. 

According to the survey by ECOVIS, the most visible example is that there is a statutory minimum salary in all countries except the United Arab Emirates (UAE), despite the fact that this does not apply to foreigners in Saudi Arabia. Fixed-term employment contracts are by far the most prevalent sort of contract, with 90% of those surveyed having one. Lifetime contracts are not uncommon (81%). No fewer than six nations – Germany, the United Arab Emirates, Austria, Poland, the Netherlands, and Vietnam – have permanent contracts that cannot be canceled before the employee reaches the retirement age or another age agreed upon.

Let’s go over the detailed employment law in some countries using the information provided by Clyde&Co.

Germany

  • Employees who are not from the European Economic Area (EEA) or the European Union must have a residence and work permit.
  • All employees in all sectors of business are entitled to a statutory minimum wage of EUR 8.84 per hour, which is usually paid. Aside from the legal minimum wage, certain industries are covered by special rules and collective bargaining agreements.
  • Overtime pay is not expressly covered by the law, but it is governed by the company’s employment contract, works council agreements, and collective bargaining negotiations.
  • Trade union members act in the interests of workers and works councils, but they do not have participation rights within the organization. Works councils, on the other hand, have extensive co-determination rights that restrict an employer’s ability to take unilateral action.
  • Because of the solid protection against dismissal, employees are frequently seen appealing their termination in court, where the parties often arrive at a settlement on the basis of a severance payment.

UK

  • The process of termination is driven by the regulations, so if the proper procedure is followed, liabilities can usually be averted.
  • As discrimination and whistleblowing laws grant strong safeguards, claims are commonly filed in court, and compensation is based mostly on financial loss (with no limit), although there are no damages.
  • Even though union representation is on the decline, workplace representation is becoming more prevalent, but it is usually not an issue for businesses.
  • Women are granted one year of maternity leave, which can be split with their spouse; however, payments are limited to 39 weeks and capped at GBP 140.98, save for the first six weeks.
  • Since April 2017, the requirements for reporting pay gaps between genders are in force.

Poland

  • The Polish tax and social security system are always changing.
  • In some cases, overtime is allowed.
  • Fixed-term contracts have lately increased in popularity.
  • Trade unions are active and have a powerful presence in the case of large businesses.
  • The number of self-employed people has increased recently.

USA

  • Employers may petition the government for an employment visa for a foreign citizen if they wish to hire that individual. A visa stamp from a US embassy or consulate must be acquired by the prospective employee if his or her petition is approved.
  • There are no minimum standards for an employment contract. An employment relationship is assumed to be “at will,” which means that it may be terminated at any time.
  • Employees working on an “at-will” basis may be fired for any reason, as long as it’s not for an illegal one, such as race or religion.
  • Under federal Social Security and Medicare programs, the United States has a number of perks for retirement.
  • There is currently no legislation in place to assist affected workers when a firm changes hands, although statutory notice requirements can be brought about if a transfer causes a large layoff or plant shut down.

The bottom line

Many businesses desire to hire internationally, but they are concerned about staying compliant with the country’s legislation. However, don’t let it deter you from tapping into the worldwide talent pool!

Keep that in mind, and remember that a well-created employment contract is a bedrock for a robust work relationship with the employee. 

Have doubts about in what country to look for a good candidate? We’re here to help! According to Designrush, StaffingPartner is one of the top recruitment agencies around the globe, providing outstanding staffing services to IT firms. Drop us a message and get your first candidate from the desired country in just three business days!

Read also: How to Speed Up the Hiring Process and Reduce Costs

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