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The main types of employment contracts are permanent (full-time or part-time), fixed-term, temporary or agency, casual and zero-hour contracts, plus at-will employment in the US. HR teams also use independent contractor, internship, apprenticeship and union (collective) agreements, and add remote work agreements to existing contracts. Any of these can be written, verbal or implied, but a written contract is the safest choice.
This guide explains each type of employment contract, when to use it, how they compare, and which clauses to include.
Key takeaways
- Choose the contract based on how long the work lasts, how many hours you need and how much you direct the work.
- Permanent contracts suit core roles; fixed-term, temporary and casual contracts suit short-term or uneven demand.
- Contractors control how they do the work. If you control the how, they may legally be employees.
- Rules differ by country and state. For example, the UK requires a written statement on day one, and most US employment is at-will.
- Put everything in writing, including probation, notice, pay and termination terms.
What is an employment contract?
An employment contract is a legal agreement between an employer and an employee that sets out the terms of the job: pay, hours, duties, benefits and how the relationship can end. It protects both sides by making expectations clear and giving everyone a reference point if a dispute comes up.
A good contract covers:
- The parties: employer and employee names, job title and start date.
- Pay: salary or hourly rate, pay frequency, bonuses and commissions.
- Hours and place of work: weekly hours, schedule, location or remote terms.
- Duration: indefinite or with an end date, and any probation period.
- Benefits and leave: health insurance, retirement, paid time off and sick leave.
- Protections: confidentiality, intellectual property and, where lawful, non-compete clauses.
- Ending the contract: notice periods, grounds for termination and severance.
- Disputes: grievance and dispute resolution steps.
In the UK, employers must give employees a written statement of the main terms, such as pay, hours, holiday and probation, on their first day of work. The contract usually follows a signed offer letter.
Written, verbal and implied contracts
Before choosing a contract type, it helps to know the three forms a contract can take. All three can be legally binding, but they differ a lot in how easy they are to prove.
| Form | What it is | Risk |
|---|---|---|
| Written | A document signed by both parties that lists the terms | Lowest: terms are clear and easy to prove |
| Verbal | Terms agreed in conversation, with nothing in writing | High: hard to prove what was agreed |
| Implied | Terms inferred from conduct, policies or long-standing practice | High: you may create obligations without realizing it |
Example of an implied contract: if your handbook says employees get two written warnings before dismissal, and you dismiss someone after one, a court may treat the handbook promise as part of their contract.
Employment contract types compared
| Type | Best for | Duration | Pay and benefits | Main risk |
|---|---|---|---|---|
| Permanent full-time | Core, ongoing roles | Indefinite | Salary and full benefits | Long-term cost; termination rules |
| Permanent part-time | Ongoing roles with fewer hours | Indefinite | Pro-rata pay and benefits | Treating part-timers less favorably |
| Fixed-term | Projects, seasonal work, leave cover | Set end date | Usually same as permanent staff | Repeated renewals can make it permanent |
| Temporary or agency | Urgent or short-term gaps | Short-term | Paid by the agency | Unclear responsibilities between agency and client |
| Casual | Irregular demand, events, shifts | Ongoing, no set hours | Paid for hours worked; few benefits | Regular patterns can create permanent status |
| Zero-hour | On-call work | Ongoing, no guaranteed hours | Statutory minimums only | Unstable income; low engagement |
| At-will (US) | Most US employment | Indefinite | Normal pay and benefits | Firing for an illegal reason is still unlawful |
| Independent contractor (1099) | Project work with defined results | Set by the scope of work | Fee or rate; no benefits | Misclassification |
| Internship | Students and early-career learning | Short-term | Paid, or unpaid only if lawful | Using interns to replace paid staff |
| Apprenticeship | Learning a trade while working | Length of the program | Wage plus training | Time and supervision needed |
| Union (collective) agreement | Unionized workplaces | Set term agreed in bargaining | Negotiated pay and benefits | Less flexibility to change terms |
| Remote work agreement | Remote or hybrid roles (add-on) | Varies | Same as main contract; adds equipment and expenses | Tax, payroll and data issues across borders |
The 12 types of employment contracts
1. Permanent full-time contract
A permanent (also called open-ended or indefinite) contract has no end date. It continues until the employer or employee ends it under the agreed terms.
- When to use: roles that are core to the business and needed long term.
- Pay and benefits: a regular salary or hourly rate, usually with the full benefits package.
- Watch out for: long-term cost and termination rules, which in many countries require notice, a fair reason or both.
2. Permanent part-time contract
The same as a permanent contract, but for fewer hours per week.
- When to use: ongoing work that does not need a full-time person, or to keep good people who want fewer hours.
- Pay and benefits: usually pro-rata, meaning in proportion to hours worked.
- Watch out for: give part-timers fair access to training, promotion and bonuses. Many countries ban less favorable treatment of part-time staff.
3. Fixed-term contract
A fixed-term contract ends on a set date or when a specific task is finished.
- When to use: seasonal peaks, parental leave cover or a project with a clear end.
- Pay and benefits: usually the same as comparable permanent employees while the contract runs.
- Watch out for: renewing the same contract again and again. In the UK, for example, an employee on fixed-term contracts for four years or more automatically becomes permanent unless the employer can show a good business reason.
4. Temporary or agency contract
A temporary worker fills a short-term need, often through a staffing agency. The agency is usually the legal employer and handles pay, while your company directs the daily work.
- When to use: covering absences or sudden spikes in workload when you need someone fast.
- Pay and benefits: set and paid by the agency. In the UK, agency workers are entitled to the same pay as a comparable permanent employee after 12 weeks in the same job.
- Watch out for: unclear responsibilities. Agree in writing who handles training, safety and performance issues.
5. Casual contract
Casual workers are called in as needed, with no promise of regular hours.
- When to use: events, irregular shifts or demand you cannot predict.
- Pay and benefits: paid for the hours they work, usually with fewer benefits.
- Watch out for: if someone works a regular, predictable pattern for a long time, local law may treat them as a permanent employee.
6. Zero-hour contract
A zero-hour contract, mainly used in the UK, means the employer does not have to offer any work and the worker does not have to accept it.
- When to use: on-call or piece work where demand changes a lot.
- Pay and benefits: in the UK, zero-hour workers are entitled to statutory annual leave and the National Minimum Wage like other workers.
- Watch out for: you cannot stop zero-hour workers from working for other employers. Exclusivity clauses can be ignored by the worker.
7. At-will employment (US)
At-will is less a separate contract than a rule that applies to most US jobs. It means the employer can end employment at any time, for any reason except an illegal one, and the employee can leave at any time too. Employment is presumed to be at-will in every US state except Montana.
- When to use: it is the default for most US roles unless a contract says otherwise.
- Pay and benefits: normal pay and benefits.
- Watch out for: at-will does not allow firing for discriminatory or retaliatory reasons, and promises in offer letters or handbooks can limit it.
8. Independent contractor (1099) agreement
An independent contractor is self-employed and works for you under a service agreement, not an employment contract. In the US they receive a Form 1099 instead of a W-2.
- When to use: project work with clear deliverables, where the contractor decides how to do it. This is part of the wider contingent workforce.
- Pay and benefits: a fee or rate per project; the contractor handles their own taxes and benefits.
- Watch out for: misclassification. The IRS looks at behavioral control (do you control what and how the worker does the job?), financial control and the type of relationship. If you control the how, the person may be an employee.
9. Internship contract
An internship gives a student or recent graduate practical experience in a structured learning program.
- When to use: building an early-talent pipeline while offering real learning.
- Pay and benefits: often paid. In the US, an internship at a for-profit company can be unpaid only if it passes the “primary beneficiary test”, a seven-factor test of whether the intern, not the employer, is the main beneficiary.
- Watch out for: do not use interns to replace paid staff. Write down the learning goals, supervision and scope.
10. Apprenticeship agreement
An apprenticeship combines paid work with structured training toward a trade or qualification.
- When to use: skilled roles in areas like manufacturing, construction, hospitality or IT.
- Duration: the length of the training program, which varies by trade and country.
- Watch out for: apprentices need mentors and time to learn, so plan supervision before you hire.
11. Union (collective bargaining) agreement
A collective agreement is negotiated between an employer and a union. It sets pay, hours, benefits, job security and grievance procedures for a group of employees.
- When to use: in unionized workplaces, common in healthcare, public services and construction.
- Duration: a fixed term agreed in bargaining, then renegotiated.
- Watch out for: managers must follow the agreement exactly, and changes usually need consultation.
12. Remote work agreement
A remote work agreement is usually an add-on to an existing contract that sets the terms for working outside the office, fully or in a hybrid setup.
- What to include: where and when the person works, equipment, expenses, data security and how hours are tracked.
- Watch out for: working from another state or country can change tax, payroll and employment law. See our international employment guide.
Why use a written employment contract?
- Compliance: it helps you document that pay, hours and leave follow the law, such as the FLSA and FMLA in the US.
- Clear expectations: a written job description, duties and reporting line reduce misunderstandings.
- Fair treatment: both sides know their rights and obligations from the start.
- Easier disputes: the contract is a shared reference point if something goes wrong.
How to choose the right employment contract
- Check how long the work lasts. Ongoing work suits a permanent contract; work with a clear end suits a fixed-term contract.
- Check how many hours you need. Regular hours suit full-time or part-time; unpredictable hours suit casual or zero-hour, where lawful.
- Check how much you direct the work. If you set how, when and where the work is done, the person is likely an employee, not a contractor.
- Check local law. Probation limits, notice rules and contract types differ by country and state. In the EU, for example, probation periods are generally limited to six months.
| If you need… | Consider |
|---|---|
| Someone long term for a core role | Permanent full-time or part-time |
| Cover for parental leave or a 9-month project | Fixed-term |
| Someone next week for a short gap | Temporary or agency |
| Extra staff for events or busy days only | Casual or zero-hour (where lawful) |
| A specialist for a defined deliverable | Independent contractor |
| To train early talent | Internship or apprenticeship |
Key employment contract clauses
- Job responsibilities: a short overview of the role and its main duties, noting that other reasonable duties may be added.
- Probation: length, how performance is reviewed and the notice period during probation.
- Termination and notice: how either side can end the contract, notice periods and any severance.
- Confidentiality and IP: what information must stay private and who owns work created on the job.
- Non-compete and non-solicitation: keep them narrow and reasonable; some states and countries restrict or ban them.
- Dispute resolution: the steps for raising and resolving grievances.
This guide is general information, not legal advice. Check local law or ask an employment lawyer before you finalize a contract.
After the contract is signed
Different contracts need different onboarding: a contractor needs a scope of work and system access, a permanent hire needs the full onboarding checklist, and a remote hire needs equipment shipped before day one. Newployee's onboarding software helps HR teams assign the right tasks and documents for each type of hire.
Employment Contract Types: FAQ
The main types are permanent (full-time or part-time), fixed-term, temporary or agency, casual and zero-hour contracts, plus at-will employment in the US. Employers also use independent contractor, internship, apprenticeship and union agreements, and remote work agreements as add-ons.
A permanent contract has no end date and continues until one side ends it. A fixed-term contract ends on a set date or when a task is finished. Fixed-term employees usually get the same terms as comparable permanent staff while the contract runs.
Often yes, but it is hard to prove what was agreed. Some countries also require written terms; the UK, for example, requires a written statement of the main terms on the first day of work. A written contract is always the safer choice.
An employee works under the employer's direction and gets wages and benefits. An independent contractor runs their own business, decides how to do the work and handles their own taxes. In the US, the IRS looks at behavioral control, financial control and the type of relationship to decide.
Not exactly. At-will is a US legal rule that applies to most jobs: either side can end employment at any time, for any reason that is not illegal. It is presumed in every state except Montana, and a written contract can change it.
Sources
- GOV.UK, “Employment contracts: Written statement of employment particulars”: gov.uk
- GOV.UK, “Fixed-term employment contracts: Renewing or ending a fixed-term contract”: gov.uk
- GOV.UK, “Your rights as an agency worker: Pay”: gov.uk
- GOV.UK, “Contract types and employer responsibilities: Zero-hours contracts”: gov.uk
- National Conference of State Legislatures, “At-Will Employment: Overview”: ncsl.org
- IRS, “Independent contractor (self-employed) or employee?”: irs.gov
- US Department of Labor, “Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act” (2018): dol.gov
- European Commission, “Transparent and predictable working conditions”: ec.europa.eu
