The 3 Types Of Business Contracts Which Every Employer Must Know!
If you're a business owner like me who’s considering hiring some employees, then you definitely need to know these different types of contracts.
The reason being that, you should know exactly which type of contract to give to each employee – so that you wont get into disputes with them.
Thus, you need to read this article if you're interested in learning more about these contracts.
NB: The 3 main types of contracts includes:
Without wasting much time, let me explain each of them in great detail.
1. Permanent Contract
In this type of contract, you offer an employee a permanent position in your company.
Thus, the employee will work for your company as long as your business functions – and these tend to get paid even if the company is on temporary closure.
However, these employees will only stop working if;
• The company closes permanently i.e. total shutdown
• The employee decides to resign due to personal reasons e.g. career/job switch
• The employer decides to fire the employee due to incompetence or other work related conflicts
Most civil servants in most nations have permanent contracts – that's why you see people like teachers, police officers, nurses, etc. – may work their whole lives in government institutions – and they get paid on a monthly basis regardless of the situation.
Thus, if you offer an employee a permanent contract, it means that you're committed to work with that person for a prolonged period of time.
NB: It's advisable to offer your employees some temporary contracts first – so as to test their working behaviours before you decide to give them permanent contracts.
2. Temporary Contract
As the name suggest, these contracts tends to last for a limited period of time like few months – although some might be as long as 1 year.
These are ideal when you have a seasonal business – which gets busy in certain periods of the year – then cease in other periods.
For example, if you have a restaurant, you might get a lot of customers during the festive season – thus, you might need to seek for additional labour in order to cater for that extra work.
In this case, you might need to sign some few additional employees on a part time basis i.e. you give them temporary contracts – which allows them to work during that busy months.
At the end of a temporary contract, the employees will be required to leave – or in some cases, they might be asked to renew their contracts – depending on the situation at hand.
But if you're a business owner, you should always offer temporary contracts to all new workers – so as to put them on probation before you decide to give them long term permanent contracts.
3. Freelance Contract
Last but not least, we have freelance contracts.
This is whereby you hire an independent third party (person or company) to work with your business, not for your business.
For example, let's say that you want to launch an advertising campaign for your business, you might decide to hire a social media marketing agency to help you with your promos.
The hired party will be responsible for helping your business in running the campaign e.g. through creating banners, running Facebook Ads, creating marketing pages, etc.
Although the hired party reports back to you, you have limited control over that person/company – since they’re only working with you – not for you i.e. they're an independent body.
Thus, if you have a project that requires specialised skills outside your employees' capacity, then you might need to hire some third parties & offer them some freelance contracts.
Wrapping Up
So these are the 3 main types of contracts that you should know as a business owner.
Once you know these, you can go ahead and start hiring some personnel for your business.
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