Analysis of Employment Contract Types in Human Resource Management

This report delves into the realm of human resource management, specifically focusing on the diverse landscape of employment contracts. It begins by defining employment contracts and their significance in outlining the terms of service between organizations and their employees. The report then meticulously explores four primary types of employment contracts: permanent full-time, permanent part-time, zero-hour, and fixed-term temporary contracts. Each contract type is examined in detail, highlighting its unique characteristics, advantages, and disadvantages for both employees and employers. The analysis includes discussions on working hours, benefits, flexibility, and the legal implications of each contract type. Furthermore, the report provides real-world examples of organizations utilizing a mix of these contract types to meet their specific operational needs and workforce requirements, offering a practical perspective on the application of these contracts in various business settings.

Managing Human Resources
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Employment contracts
Brun and Cooper (2016) suggests that Human resource management refers to a integral
function of management which focuses on handling human resources of the organisation. This
practice begins from establishing contacts with prospective clients (termed as Recruitment) and
ends with employee leaving the organisation. This whole process consists of various operations
like conducting selection tests, formulating compensation policies for employees and every other
aspect related to the workforce of organisation. Staffing is the most important role of any human
resource manager and during this staffing process, there is establishment of various employment
contracts which are on the basis of terms of employment service. This report focuses on
explaining these different types of contacts that are made between the organisation and
employee. Following statement is divided into two parts, first part discusses about different types
of employment contacts and second part discusses real life example of organisations showcasing
adoption of mix of employment contracts in order to meet their unique organisational needs.
As per the viewpoint of Hickey and King (2016), there are various types of
employment contracts that provides advantages and disadvantages both to employee and
employer as well. An employment contract can be defined as a written document which
basically underlines or mention about different conditions of service or employment such as role
and responsibilities of that employee, financial incentives (salary or compensation) and rights
delegated are also specified in the document. According to views of Borowczyk-Martins and
Lalé (2016), this is the binding document between employer and employee and it outlines the
legal terms that regulates the employment service. This contract can be updated during the whole
time of employment in accordance to the changing terms of employment service. There are
majorly four types of employment contracts which are - Permanent Full Time contract is a
type of contract which establishes a permanent contract between employer and employee. It
binds the employee with no minimum number of hours of working and it contains all details
related to holiday entitlements, pension benefits, parental leave allowances and details relating to
statutory sick pay. This type of contract is most famous among employers and employees. From
the view point of Aust, Brandl and Keegan (2015) Time period for this agreement is not fixed.
This time period of employment can be extended as per the requirements and performance of
that employee in the company. If the term is not being extended than in that case, employee is
free to leave the company as on the agreed date in the contract. The benefits of full time contract
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is provides health insurance facilities to its talented workers. Provide support to employees to
maintain work-life balance in order to ensure satisfaction and effectiveness. According to
Cappellari and Leonardi (2016), in a full time contract, the employee is generally expected to
work for at least 35 hours or more a week.
Permanent full time contract have pros and cons as well for both employees and
employers as well.
Firstly talking about employees, advantages under this contract are they do not have any
confusion regarding their roles and responsibilities in company. From the viewpoint of Gold
(2020), salaries are also mentioned clearly in this document which means that employees are
clear about the incentives they will be receiving from the service they are providing in the
company. Fixed time period provides a clarity of mind as employees are clear about the terms
and conditions of employment agreement. This will result in complete understanding of terms of
employment for employee. Another advantage in this contract is that it restricts the working to
48 hours per week except the cases of emergencies. Burt (2016) suggest that mentioning about
limitations, under this contract, employees are bound to work to work for minimum 35 hours per
week. This means that they have to work irrespective of any problems that they are facing in
their personal lives. This sometimes leads to dissatisfaction among employees and because of
this they will not be able to give their full productivity. There is no fixed time period in
permanent contact but it provides great opportunities to employees for career development.
Employers also face certain benefits and limitations, firstly, this contract clearly mentions
about all the terms and conditions of service. This process will clear all the confusions and
hence, it will lead to good communication between employer and employee. According to
Collins (2016), if good co-ordination is established between both than it will result in improved
productivity and performance of employees. Furthermore, as working hours are fixed in these
types of contracts, than it will lead to no issues relating to idle hours, which is considered a big
wastage of cost and time as well. Each and every regulation relating to terms of employment is
mentioned in this contract which eases the management of employees under this category. From
the viewpoint of Cummins (2018), employers face certain drawbacks as well as due to fixed
working hours, sometimes the superior become very strict which leads to dissatisfaction among
employees and this in turn results into decreased performance.
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Next comes up Permanent part time employment contract and it is a type of a contract
under which employees are working regularly with the organisation, but for fewer hours a week
that the employee who is under permanent full time contract. Olleros and Zhegu (2016) suggest
that in technical terms, it can be defined as the contract under which employee works less than
38 hours a week and have regular pattern of working hours. These employees are entitled to
receive annual leaves, sick leaves and carer leaves on proportionate basis with the hours they
work for company. Like other employment contracts, part time workers also need to give or
receive notice so as to end their term of employment. Employees under this type of contract can
do overtime as and when they desire to do. These type of contracts are beneficial and also poses
some limitations to both employer and employees.
Advantages to employees One of the biggest advantage of this method is the flexibility
that it provides to employees bounded by this contract. As the employment is for part time only,
therefore, employees feel easy to manage their work around with other commitments and people
can easily try out new roles as they have ample of time after completing their professional
responsibilities in company. Due to all these benefits mentioned above, employee have a feeling
of satisfaction and thus, they tend to perform their duties with complete commitment and this
enhances productivity of organisation.
Disadvantages for employees According to De Cuyper and Isaksson (2017), this
contract has certain limitations too for employees such as it offers part time employment to
candidates, hence the pay is also comparatively low. This low pay poses a disadvantage for
employees. The employee has to give or receive notice before ending the employment with
company and this bounds the employee before termination.
Advantages to employer From the views of de De Jong (2015), this contract provides
easiness to employer in managing human resources as every role and responsibility is clearly
specified in the contract which is bounding on both employee and employer as well. Pay is also
less comparative to other full time employees, this results in completion of work at a low cost.
This makes the permanent part time contract more efficient as compared to other techniques.
Disadvantages to employer Permanent part time employment contract poses some of the
limitations for employer as well. These relates to less working hours (i.e. less than 38 hours) as
per the regulation. Overtime also depends upon choice of employee that whether they want to do
or not. This makes the completion of duties comparatively tougher than full time employees.
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Flexible structure also makes employees very easy and they may start taking their duties for
granted, which is bad for the organisation's performance.
From the viewpoint of White (2016), next comes in line Zero hour contracts which is
established between employer and employee and according to terns of this contract the employer
is not mandated to provide any minimum working time and employee is also not obliged to
accept every work that is offered to him by the employer. According to this contract, employee
agrees in the contract to be available for work as and when there will be a requirement. In this
case, there is no fixation of minimum working hours in the contract. These contracts enables on
call scheduling for employers and employees. This contract is primarily used in United
Kingdoms. Zero hour employment contracts provide basic security benefits to employees
bounded by these contracts such as maternity/ paternity leaves, holidays, health insurance, etc.
Advantages to employee According to Freedland and et.al. (2016), under this contract,
there are various benefits for employee. One of the main benefit is that they are not permanently
bounded by minimum working hours, hence, they are free to engage in other professional
commitments during the time of contract also. Security benefits provided to employees under
this contract despite being in no minimum hour contract is another attractive point for
employees.
Disadvantages for employees This contract requires employee to be available on the call
as and when required. This becomes a great limitation for employees as being there on call every
time is always not possible. The employee may be engaged in other commitments also and at
that time it becomes difficult to fulfil this requirement.
Advantages to employer From the viewpoint of Green and Livanos (2015), under this
contract, the employer will find it easy to manage the employee as they are not in regular
working hours, they will be available on call as and when required. This will ensure completion
of tasks without making extra efforts of management and other related aspects such as workplace
culture, sitting arrangements, etc.
Disadvantages for employer As mentioned in the regulating law for these types of
contracts, employee is not bound to take every work that is being assigned to him. This makes
the task of management tougher as they needs to take care of this point and he can't force the
employee to do that work.
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Nkomo and et.al., (2015) suggest that last in queue is Fixed term temporary contract
and it is type of agreement, according to which an employee is hired by the company for a fixed
period of time. After the expiry of that specific time period, the contract can be renewed if both
the parties involved agrees to it. The main feature of the contract is that the employee under this
contract is not on the payroll of the organisation. In this type of contract, the payment for the
services are fixed in the beginning only and they do not encounter any changes during any time
of service. These contracts are signed for the temporary jobs and not for replacing the permanent
employees if they go for a long leave. Company has the power of terminating the contract before
the due date expires, this is done only in the case when there is serious allegations on employee
such as frauds, theft, security breach, etc. another important characteristic of this contract is that
employees do not get provident fund and some other important benefits which are availed by
those employees who are on the payroll of the company.
Advantages for employees From the viewpoint of Whittington and et.al. (2017), this
contract provides security of employment for the specific time period mentioned in the contract.
The contract can also be renewed after the time period expires. This acts as motivation for
employee to perform better in order to make the contract renewed in future.
Disadvantages for employees Hammer and et.al., (2015) suggests, the fixed pay is the
biggest limitation of this contract. If the contract is for one year, than also the pay will remain
same as fixed in the beginning. This can demotivate employees and they may not be interested in
entering into fixed term temporary contract.
Advantages for employers From the viewpoint of Huws, Spencer and Syrdal (2018),
this contract is very cost efficient for employers as they can hire employees on a fixed rate in
order to fulfil requirement for a temporary job. Furthermore, this method provides an opportunity
for making that employee permanent if he performs well in the organisation, this also helps in
saving cost that is needed to invest in recruitment process.
Disadvantages for employer Due to fixed pay policy of this type of contract, it becomes
tough for managers to motivate employees to perform better. Therefore, employer will have to
think about different non financial methods to motivate them. Another limitation that is posed for
employer is the fixed time period of this contract. If the temporary job is not completed in the
fixed time period than the company has to renew the contract and that will the extra addition to
the total cost.
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In real business world, organisations are adopting various employment contracts in
accordance of the requirements. A single type of contract can be taken or a combination of
different contracts can also be adopted. To illustrate this situation, examples of companies like
Tesco and Aldi is taken. This part of the report explains about how contracts are offered to their
employees. To understand the reason behind the choice of employment contracts by above
mentioned organisations, it is necessary to first understand about the factors that affects this
choice.
Jaehrling and et.al., (2018) suggest, first important factor is nature of job for which
hiring is being done that affect the choice of employment contract. For instance, if the job is
temporary than the most suitable contract is fixed term temporary contract. This explains the the
suitability of each type of contract. Another factor is time period. If the employer requires long
and fixed working hours, than they have to choose the contract accordingly. This is the factor
that explains that employer should determine that what will be the working hours for which the
employee needs to be there at the working station. Last comes up the pay scale. According to
this factor, the employer determine the affordability for the payment that they can make to the
employee. If there is very restrictive fund that can be offered as pay than the most suitable
contract will be fixed term temporary contract, as it involves fixed pay during whole period of
service.
Tesco's employment contract The most prominent contract that is used by the company
is fixed employment contract. According to this contract, the time period fixed for this contract is
12 to 18 months (Employment contract, 2020). The working hours specified in the working
contract is 36 hours. The company has also specified all the relative roles and responsibilities
that the employee needs to fulfil during the service time. The company is trying to fulfil all
relevant requirements mentioned by regulating authorities for this type of contract. Employees
need to work for more 36 hours if company demands for. The pay in this contract is competitive
as mentioned by the company in the contract.
ALDI's employment contract Unlike Tesco, this company has chosen a combination of
employment contracts (Employment contract of ALDI) and it is a mix of permanent full time
employment contract, permanent part time contract and zero hour contract (often referred to as
casual employment contract). Permanent full time employment contract: Under this
contract, employees are being hired on fix salary or hourly rate basis. Time period are also fixed
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under this employment contract and it is 38 hours per week. In addition to this fixed time period,
employee can be needed to work for additional reasonable hours on any day of the week. This
additional hours can only extend to total 48 hours a week. There is difference in pay structure for
salaried employees and employees who are working on hourly rate basis. There is no overtime
bonus for those employees who are hired on salaries basis. On the other hand, employees
working on hourly rate basis will be paid for total working hours including overtime hours also.
Next comes up permanent part time employment contract which includes those employees who
are hired for working for less than 38 hours per week. This category also include both, salaried
and hourly rate basis for employment. Slack, Corlet and Morris (2015) suggest that the
difference in this category stands at pay structure for hourly rate employees. According to terms
of this contract, employees are instructed in the beginning only about the maximum hours for
which they will be paid at the bankable hourly rate. The main feature of this contract is that it
provides flexibility to employees. This flexibility allows employees to request for reducing their
workable hours. This request is accepted only in the case when the reason given for this request
is found genuine or reasonable. Last option in this combination is zero hour employment contract
or casual employment contract. According to terms and conditions laid down in this contract,
employee need not to be present for all times for services. The working hours under this contract
are fixed which is at least three hours per week. These three hours can be availed by the
employer at any day of the week i.e. Monday to Saturday. The most advantage of this contract is
that employees needs to update company about their availability till 15th of month. The company
will use this information in order to prepare roaster for that employee. This will enhance the
communication between both the parties and further, performance is also improved. One
important mention in this case is that continuous refusals by employees related to offered shifts
may result in no offering for engagements in future with the company. Under this contract,
employees are not entitled to receive pay for public holidays, annual, personal/carer's
compassionate or jury service leave. From the viewpoint of Wachsen and Blind (2016), casual
Employees are entitled to unpaid carer’s leave and unpaid compassionate leave in accordance
with the National Employment Standards and may be entitled to long service leave depending on
applicable state legislation.
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In this report, it can be elucidated that there are various employment contracts that can be
adopted by organisations for their employees. Choice of employment contract is in accordance
with the requirements of organisation and suitability of different contracts terms. In task 2 of
above report, it is clearly explained that how real life organisations are using mix of different
types of employment contracts in order to meet their requirements. To adopt a specific contract,
it is essential for the management of organisation to carefully analyse the requirements so that
correct option can be selected. There will be serious consequences if the right alternative has not
been selected, as employee and employer both will find difficulty in managing their professional
roles and responsibilities. On the other hand, if the right combination is selected than it will lead
to completion of task and roles efficiently and effectively.
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Online
Employment contract of ALDI. 2020. [Online]. Available
through:<https://www.jobsite.co.uk/jobs/contract/aldi>
Employment contract. 2020. [Online]. Available
through:<https://www.tesco-careers.com/jobdetails/264955>
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