Depending on the nature of your business, you may be ready to bring some additional support on board. If you are consistently selling out of product, closing on days when you would like to serve customers, or booked out onto a waitlist, bringing on an extra set of hands will open new doors for your business. Having sufficient labour to meet the needs of your client base is the first step to scaling your business.
Adding employees to your roster is an effective way to expand your work capacity—but what different types of employment contracts are there? And how do you know what kind of employee will best suit your needs?
The type of employment contract you need will largely depend on your business model. For example, do you need short-term support for specific tasks or someone on a reliable schedule? Or perhaps you just need a list of on-call professionals to choose from when needed.
Whatever your needs, it is vital that you select the correct designation for your workforce. Different laws apply to each class of workers, and misclassifying your labour is not only unethical but illegal. Read on for some guidance about the different types of U.K. employment contracts.
What Type Of Employment Contract Do I Need?
The correct employment contract for your business depends on your model and stage. Before deciding upon the type of workers you want to work with, consider the needs of your business carefully: Do you need someone reliable around the clock or just an on-call specialist?
There are a few major types of employment contracts in the U.K.:
- Agency staff
- Freelancer & contractor
If you own a typical brick-and-mortar business that requires a clerk or serving staff, you’ll likely have them under a full or part-time contract and need to follow certain requirements for minimal hours. For fixed-term contracts, such as labourers to complete a specialised construction project, you’ll still need to follow requirements for pay, but different laws apply.
Freelancers and contractors are different types of employees: They typically deliver by piece and are only signed on for one task. This is different from a zero-hours contract, where you are not required to offer hours, but neither are they required to accept work on-demand.
Permanent Part- and Full-Time Contracts
These are the most common types of U.K. employment contracts and the ones most people think of when picturing employment. Full or part-time employees are employees contracted to work for you regularly, predictable basis. While the schedule may change from week to week slightly, the contract you sign with these employees will denote a specific number of minimum hours.
Full or part-time employees are ideal for businesses where you need additional labour for the foreseeable future. Some companies who may benefit from this type of employment contract include:
- Foodservice establishments, such as cafes and restaurants
- Manufacturers who produce on a regular schedule
- Logistics companies who hire people throughout the supply chain
- Retail shops employing cashiers or stock clerks
- Organisations operating in healthcare or healthcare-adjacent industries
- Business firms with normal operating hours that must constantly be staffed
The above is not a comprehensive list, and you may find you need full- or part-time employees in other circumstances. It’s also important to note that permanent contracts can offer variable hours, meaning that the time commitment made by workers with this arrangement may differ depending on your organisation’s specific requirements.
Pros And Cons Of Permanent Contract Employees
Some benefits of hiring employees under this type of employment contract include consistency, predictability, and a spare set of hands during their scheduled work hours. Despite these benefits, they can also be one of the more costly types of employees.
Employees under your business must be provided with statutory sick pay, parental pay and leave, mandatory vacation time in line with their designated hours, and any other required worker payments depending upon your district and industry.
In addition to these expenses, you must also provide them with a payslip showing their paycheck deductions, such as National Insurance Contributions (NICs). You must also register with HM Revenue and Customs to oversee your full or part-time employee’s payroll, tax and NICs. Employers are also required to carry employers’ liability insurance for all permanent employees.
While nobody likes to terminate employees, the possibility of this occurrence is important to consider in the case of permanent employees. Employees in permanent positions have a legal right to notice of termination in advance, as follows:
- One week of notice for employees who have been employed from 1-24 months
- An additional week’s notice for each continuous year of service, up to a maximum of 12 weeks
As well as notice, employees must be given fair reason to have been let go. If you do not intend to need employees long term and are not prepared to handle the notice process, you may need a different type of employment contract for your small business.