Contractual Models: Advantages, Disadvantages, and Examples

This report provides a comprehensive overview of various contractual models used in human resource management. It begins by defining and explaining different types of employment contracts, including permanent full-time, permanent part-time, zero-hour casual, and fixed-term temporary contracts. For each type, the report details the advantages and disadvantages for both employees and employers, considering factors such as benefits, flexibility, loyalty, and innovation. The report then moves on to provide real-world examples from different organizations, illustrating how they use these contractual approaches and the rationale behind their choices. The analysis covers the implications of each model on employee entitlements, work-life balance, and overall company efficiency. The report concludes with a summary of the key findings and a discussion on the importance of selecting the most appropriate contractual model to align with business goals and employee needs.

ASSIGNMENT

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Explanation of different types of contractual model along with advantages and disadvantages3
TASK 2............................................................................................................................................8
Examples from various organizations focusing on how and why the company uses different
methods of contractual approaches.............................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Human resource function of a business is the most important function as this assist the
company in recruiting the employees within the company. If the human resource function of the
company is not effective then this will have a great impact over the working of company
(Fontinha, Van Laar and Easton, 2018). Thus, the current essay will outline the various types of
contractual model along with their advantages and disadvantages for both the employees and
employers. Further in the end the use of two different companies will be taken in order to show
that how they use different contractual approaches within the business.
TASK 1
Explanation of different types of contractual model along with advantages and disadvantages
When a person is being recruited in a company then they have to sign a contract with the
company. These contracts can be of different types and as per the requirement of the company
and the candidate being employed the contract is chosen. These are the employment contract as
this includes the various terms and condition on which the employee is being chosen for the
company. These contracts play a crucial role during the whole of the life of employee within the
company. The employment contract is a type of agreement among the company and the
employee joining the company. Under this all the roles and responsibilities of the person joining
the company and liabilities of the company towards the employees are being highlighted. In
simple terms the employment contract is a contract between the employees and the employers.
There are different types of contract which can be signed by the employees at time of
joining in the company. The common types of contract which a company can use are discussed
as follows-
Permanent full- time contracts- this is a type of contract which is offered for the position
in company which are permanent and the salary of the employee is also fixed. In addition to this
the permanent contract also involves all the entitlements which the employee is liable for like the
holidays, pension, leave entitlements, details of pay as per Statutory Sick Pay (SSP) (Types of
employment contracts, 2020). Under the fixed full time contract the employee is having all the
benefits and the entitlement which the permanent employee of the company gets. The major
reason for this is that when the employee is permanent within the company then they enjoy the
benefits which the company has. There are many different types of benefits and drawbacks

which both employees and employer faces at time when they sign a permanent full- time
contracts. These are discussed as follows-
Employee
Advantages
The major benefit to the employees of the use of permanent full- time contracts is that
this provides the company with good entitlements like medical, insurance, holidays and others
(Wren, 2020). Another benefit in addition to this is the retirement benefits and the pension
facility which the company provides to the permanent employee. The major reason for this as a
benefit is that this assist the person to also have a secure future even after the job is completed.
Disadvantages
The major drawback of the full time employment is that when the employee is in this
type of contract then they expect that every time they take holiday will be paid to them. But this
is not possible that whenever the employee takes the holiday then the company will pay for it. In
addition to this another drawback of this permanent full- time contract is that the employee is
bound to work with the company. thus, in case if the employee gets any other better opportunity
then they cannot opt for the opportunity as they are in full time contract with the company.
Employer
Advantages
The major benefit of permanent full- time contracts is that the company or the employer
gets the full time loyalty of the consumer and this increases the company and its working
efficiency. Along with this another major advantage for the employer is that they can have a
fixed duration for the employee and even if the employees will get better opportunity then also
they will not leave the company.
Disadvantages
The major disadvantage of using the permanent full time contract in business is that this
limits the candidate choices for the company. This is particularly because of the reason that the
company is bound in a contract with company and for this they cannot get new and better
options. In addition to this another major drawback is that this type of contract limits the
innovation taking place in the environment (Guest and Clinton, 2017). The major reason for this
is that the employees have a feeling that they are bound with the contractual obligation and if
they will not work in effective manner then also they will have the same pay.

Permanent part- time contracts- this is a type of contract which is permanent but
involves a person who work regularly but less than the employee working for full time. Under
this method of contract the company hires a person on permanent basis but works less as
compared to the permanent employee (Ling and Tsai, 2019). The permanent part time employees
are also entitled with the different types of benefits like pay, annual leaves, sick leaves and much
other benefit allowed to permanent full time employee. There are many different types of
benefits and limitation which both employer and employee enjoys under the permanent part time
contract and these are as follows-
Employees
Advantages
The major advantage which the employee under the permanent part time contract is that
the employee gets all the benefit which the permanent employee is entitled but has to do less
work as compared to the other permanent employees. Further the major benefit is that the term of
contract is fixed and after the maturity the contract need to be renewed if both the parties agree.
Disadvantages
The major drawback of the permanent part time contract is that as the employee has less
workload in company so it is not easier for employees to schedule or plan for the working of the
company on their own. They just have to listen to the person under whom they are working. In
addition to this another major limitation is that if the company is not having effective production
then the work of permanent part time employees will be low as the company is not having good
working. Thus, this will result in the negative impact over the performance of the company.
Employers
Advantages
The major benefit for the employer of permanent part- time contracts is that the company
has to pay less to these employees. the major reason underlying this fact is that the part time
employee are provided with less working hours and for this the company has to pay less money.
Disadvantages
The major drawback of this type of contract for the employer or company is that the
employer cannot build an effective relation with these employees as compared to full time
employees (De Ruiter and et.al, 2017). The major reason for this that part time employee come
for less time and this affect relation between them.

Zero- hour’s casual contracts- this is a type of contract in which there is an agreement
which states that the present employer is not liable or obligated in providing worker with
minimum number of hours (Kong, 2020). Under this contract there is not any guarantee of the
employee getting work or work on which basis in the company. This is particularly because of
the reason that when the company is not providing information relating to the minimum hours
then the amount of payment is not fixed. This contract works on basis of the prevailing situation
as if the company will be having worked then they will call these casual worker. Thus, how
much these casual worker will work then they will get the payment in accordance with the work
they will perform.
Employees
Advantages
This type of contract is of benefit for the employees as this provides flexibility to the
employees as when the company requires the employees then they will get the work otherwise
not. Another major benefit of this type of contract among employee and the company is that this
assists the employee in managing their work life balance. This is particularly because of the
reason that when the employee has a casual contract with company then they can go as the need
is there and rest they can try to manage the personal and professional life.
Disadvantages
The major drawback of this method for employee is that there is not guarantee for the
employee that how much work they will get. This is particularly because of the reason that there
is no fixed working hours provided to the zero hour casual contracts. Another major limitation of
this is that there is no access to any training and development session to the casual workers as
their working hour is not fixed and they are not permanent employees of the company.
Employers
Advantages
The major benefit of zero hour casual worker is that the company is not bound to pay the
casual employee just as much the work will be done only that much payment will be made to the
casual worker (Williams, 2020). In addition to this another major benefit is that the employer has
flexibility that when there is more work they can call the zero hour casual worker and otherwise
not. Thus, this will be helpful in managing the time when the work is very high.
Disadvantages

The major limitation of this type of contract is that if the casual worker will not be
available then this will create problem for the employer in finding good casual workers (Arranz,
García-Serrano and Hernanz, 2018). Along with this another major limitation is that it might be
possible that the casual worker not have complete knowledge then if the company tries to train
them then this is not worth. The major reason for this is that they are not permanent workers of
the company.
Fixed- term temporary contract- these are type of contract which last for a fixed specific
period of time which is set in advance. Under this the person is an employee of the company for
a fixed tenure and as the tenure is completed then the contract ends. Further if both the parties
agree then they can have the contract renewed.
Employees
Advantages
The major benefit of using the fixed term employment contract is that for a fixed period
of time the employee has work and within this time frame they can work will efficiency and earn
well. Another major advantage is that this is good for the employees as they can find their
interest area and ca work on fixed term contract and learn things
Disadvantages
The major drawback of this type of contract is that the employee is bound in the contract
for the fixed period of time and if during this time they will get any other opportunity then they
cannot go for it.
Employer
Advantages
The major advantage of this type of contract is that the employer can utilise the employee
to the fullest as the employee is bound to work for the company for the fixed period of time.
Disadvantage
The major limitation is that even if the employee is not working in effective manner the
company or the employer cannot terminate the employee (Fatoni, Prihatini and Suryaningsih,
2018). The reason for this is that when the employee is not working in required manner then also
the company cannot leave them as they are in a contract for fixed period of time.

TASK 2
Examples from various organizations focusing on how and why the company uses different
methods of contractual approaches
There are many different companies which makes use of different types of employment
contract to attract the employee to work in effective and efficient manner. The employment
contract is a type of agreement between the employees and the employer in which they decide
for all the terms and condition of working and how the work will be executed, what will be the
pay and other benefits (De Ruiter, Schalk and Blomme, 2016). It is very essential for both
company and the employee to decide for all these things in advance so that there is not any
problem in the future.
The employment contract bound people with the company and they have to follow all the
things which are mentioned in the contract. This is very important for both the employee and the
employer to sing the contract as they know their duties and responsibilities for one another.
Further this employment contract also provides a job security to the employee as they have a
signed contract with the company. In addition to this employment contract also provides for the
details of all the responsibility of the employee towards the company and the obligation of the
company towards the employees. Further for this the employment contract also protects the
rights of the employees as all the details of the work are mentioned in the contract. Further it is
also very important for the company to maintain the confidentiality of the contract and not to
leak any of the information and keep each and every information confidential and secret.
In addition to this the company makes use of different types of contract of employment as
with help of this the company can have a wide variety of employee within the company. For
example the permanent full time employees are there for the company to work in effective
manner. Further with help of permanent part time employee the company can also increase its
working in effective manner. In addition to this when the work is more then the company can
hire the zero hour casual workers. Furthermore, the company hiring the fixed term temporary
employee is also beneficial as they are temporary but for a fixed period of time and as the time is
finished either they can be terminated or the contract with them can be renewed. Hence, all these
types of contract are of importance for the company as this will assist the company in getting a
wide variety of employees in the company and improve the effectiveness of company.

For instance, Tesco uses the contract of 12- 18 month fixed term contract. Under this
contract the employee is provided employment for a fixed tenure of 12- 18 month (Employment
policy- 12- 18 month fixed term contract, 2020). After this time frame is completed then if the
employer likes the work of the employee then they can renew the contract for further next period
of 12- 18 months. The major reason for Tesco using this method of contract is that this is very
effective and helpful in assessing the ability of employees. The major reason for this is that under
this contract the person is recruited for a fixed period of time and if the working of employee is
not good then they can terminate the employee as the contract ends. Further is the employee is
working in effective manner then the fixed term contract can be converted into permanent full
time employment contract.
The major reason for using the fixed term contract by Tesco is that in a tie frame of 12-
18 month the company will come to know that whether the employee is worth working in
company or not. if the employee has the capability of working in big company then they will be
trained so that they become more capable and this will improve the working capacity of
employee and as a result of this overall company efficiency will increase. Furthermore, if the
employee is not competent and efficient then the company knows that they do not have to renew
the contract and terminate the contract with that employee. Thus, this type of contract assists in
finding best employment for the company so that they can work in better manner and increase
the profitability of company.
Furthermore, another company Marks and Spencer is the company which majorly focuses
over the permanent full time contract. The major reason for this is that with help of full time
contract the company can get effective employees. The major reason for this the permanent
employees work in effective manner and they think for the company and its growth and
development. The major reason underlying this fact is that when the employees are permanent
then they know if the company will grow then only the employees will be paid in effective
manner. Thus, this permanent contract is helpful for Marks and Spencer as this will help them in
getting a wider and competent workforce which will have a good impact over working and
profitability of the company (Kutaula and et.al, 2020).
In the end it is clear that all the type of contract is present in every company and is
assistive in increasing the working efficiency of the company. This is particularly when all the

different types of employees are present in the company then this will help company in growing
and developing in effective manner.
CONCLUSION
In the end from above discussion it is clear that the use of employment contract is very
important for the company to get successful. The major reason for this is that if the employees
are not effective then this will have an effect over performance of company. Further it was seen
that there are majorly four type of employment contract that is permanent full time, permanent
part time, fixed term temporary and zero hour casual contract. These entire contracts are helpful
for company in hiring effective employee for betterment of the company. It was also seen that
there are many companies who uses different types of employment contract in order to recruit
employees within the company. Further it can be seen that employment contract are essential to
bind the employees in working in effective and efficient condition.

REFERENCES
Books and Journals
Arranz, J.M., García-Serrano, C. and Hernanz, V., 2018. Employment quality: Are there
differences by types of contract?. Social Indicators Research. 137(1). pp.203-230.
De Ruiter, M., and et.al, 2017. Psychological contract breach in the anticipatory stage of change:
Employee responses and the moderating role of supervisory informational justice. The
Journal of Applied Behavioral Science. 53(1). pp.66-88.
De Ruiter, M., Schalk, R. and Blomme, R.J., 2016. Manager responses to employee dissent about
psychological contract breach: A dyadic process approach. Management
Communication Quarterly. 30(2). pp.188-217.
Fatoni, M., Prihatini, D. and Suryaningsih, I.B., 2018. The Role of OCB in Mediating the Effect
of Employee Engagement and Organizational Commitment on Employee Performance:
Contract vs Permanent Employees.
Fontinha, R., Van Laar, D. and Easton, S., 2018. Quality of working life of academics and
researchers in the UK: the roles of contract type, tenure and university ranking. Studies
in Higher Education. 43(4). pp.786-806.
Guest, D.E. and Clinton, M., 2017. Contracting in the UK: Current research evidence on the
impact of flexible employment and the nature of psychological contracts.
In Employment contracts and well-being among European workers (pp. 201-223).
Routledge.
Kong, C.S., 2020. The Role of Employee Human Resources Attribution on Developing
Psychological Contract and Turnover Intention in Hong Kong.
Kutaula, S., and et.al, 2020. Exploring frontline employee-customer linkages: a psychological
contract perspective. The International Journal of Human Resource Management, pp.1-
38.
Ling, Y.H. and Tsai, P.W., 2019, July. Benefits Satisfaction and Employee Performance from the
View of Employment Relationships (WITHDRAWN). In Academy of Management
Proceedings (Vol. 2019, No. 1, p. 12172). Briarcliff Manor, NY 10510: Academy of
Management.
Williams, A., 2020. Effects of Psychological Contract Breach on Affective Commitment,
Employee Engagement and In-Role Behavior, when Moderated by Employee
Status (Doctoral dissertation, Trident University International).
Wren, D., 2020. The culture of UK employee-owned worker cooperatives. Employee Relations:
The International Journal.
Online
Employment policy- 12- 18 month fixed term contract. 2020. [Online]. Available through: <
https://www.tesco-careers.com/jobdetails/264955>
Types of employment contracts. 2020. [Online]. Available through:
<https://www.reed.co.uk/career-advice/types-of-employment-contracts/>