Employment contracts in the
UK

SALARY PAYMENT IN British Pound (GBP, £)

CONTRACT LANGUAGE English

PAYROLL TAX 8.25%

PAYROLL CYCLE Monthly

TIME TO HIRE 12 hours
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Standard employment contract in the UK: Open-ended contract

Contracts in the UK are open-ended, or more commonly referred to in the UK as ‘indefinite’ or ‘permanent’ contracts.

Alternative employment contract in the UK: Fixed-term

A fixed-term contract in the UK is a contract which has been agreed to last for a set amount of time. They are set to end when either:

A specific task is completed,
A specific event takes place.

If a fixed term contract is not renewed:

After 1 year: you must provide a written statement of reason for not renewing the contract. If the reason is redundancy, then statutory redundancy applies.
After 2 years: not renewing the contract is considered a dismissal and must have a valid reason or there is a risk of a claim for unfair dismissal.

The maximum duration of a fixed-term contract is 4 years. Any fixed-term contracts exceeding 4 years without a good business reason are automatically converted into an open-ended contract.

These types of contracts are often used when an employer needs to cover a specific role for a limited period, such as maternity leave cover. Fixed-term employees must receive the same treatment as full-time permanent staff.

Are there other types of employment contracts in the UK?

A zero-hours contract is a type of contract which does not guarantee the employee any set hours of work. They are often referred to as ‘casual’ contracts.

Zero-hours contracts mean that employers can ask workers to be on call to work when needed, and employers do not have to give them a set number of hours or any work at all. However, employees on a casual contract do not have an obligation to be available for work when asked. Employers cannot have employment clauses in zero-hours contracts that prevent employees from accepting other work.

Zero-hours workers are still entitled to statutory annual leave, and the National Minimum Wage, and employers cannot prevent zero-hours workers from getting other work.

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FAQs

What are the main differences between the permanent contract and the fixed-term employment contract in the UK?

Open-ended, or permanent, employment contracts are the most common type of contract in the UK. They offer ongoing employment with no fixed end date. They have more flexibility for termination but they are more difficult and costly than expiration of fixed-term.

Fixed-term contracts, on the other hand, are typically used for specific roles or projects that have a defined start and end date. Dismissal is possible but this must be stated in the contract. deciding not to renew a fixed-term contract can result in the risk of an unfair dismissal claim and a potential compensation payment.

Zero hours contracts are a more flexible type of employment contract that does not guarantee a set number of hours each week. Instead, employees are only required to work when needed.

Which UK employment contract is right for me?

The type of contract that is best for you depends on the job role that you require and the specific circumstances. For most roles, an open-ended contract is the most suitable, but in some circumstances, an alternative like fixed-term may be more suitable.

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