Permanent Employment Contract: Your Path to Stability
Written by: Carin Vreede
Last updated: 11 August 2023
Table of contents
What is a permanent contract?
A permanent contract, also known as a permanent employment contract, is a type of employment contract that is not limited in duration. This means that the employee is hired indefinitely and is not required to renew the contract at a specific time.
Permanent contracts are typically offered to employees who have proven valuable to the company and are expected to remain with the organization for an extended period.
8 Key ingredients of a permanent contract
Here, we'll discuss the eight key ingredients of a permanent contract.
The job title specifies the employee's position within the organization. It should accurately reflect the nature of the work and the level of responsibility involved.
The job description outlines the tasks and responsibilities the employee will be expected to perform. It should be clear and concise and provide a detailed understanding of the scope of the job.
The term of the contract specifies the duration of the employment relationship. A permanent contract is typically open-ended, meaning it does not have a fixed end date. However, the contract may specify certain conditions under which the employment relationship may be terminated.
Base compensation and bonuses
The contract should specify the employee's base salary or an hourly rate of pay and any bonuses or incentives that may be offered. It should also outline any raises or increases in pay that may be granted throughout the employment relationship.
The contract should outline the benefits that the employee is entitled to receive, such as paid holidays, health insurance, and retirement plans.
The contract should outline the circumstances under which the employment relationship may be terminated, such as for misconduct or poor performance. It should also specify any notice period that must be given before termination.
A restrictive covenant is a provision in the contract that restricts the employee's ability to engage in certain activities after the employment relationship has ended. These may include non-compete clauses, which prevent the employee from working for a competing company, and non-disclosure employee agreements, which prohibit the employee from disclosing confidential information.
The contract should include standard legal language that outlines the rights and responsibilities of both the employer and the employee. This may include provisions related to employment law, such as the minimum wage and the employee's rights under the Employment Rights Act.
Overall, a permanent written contract provides job security, stability for the employee, and a clear understanding of their rights and obligations. It is a written statement of the terms of the employment relationship and serves as a legally binding agreement between the employer and the employee.
Benefits of a permanent contract
A permanent contract offers many benefits over other types of employment contracts. Here are some of the most notable advantages of a permanent workforce:
Stability: One of the main advantages of a permanent contract is its stability. As a permanent employee, you have the security of knowing that your job is not at risk of ending abruptly. This can provide peace of mind and allow you to plan your long-term career goals more confidently.
Career progression: Permanent employees often have more opportunities for career progression than fixed-term employees. This is because permanent employees are considered a more committed and long-term investment by the company and are, therefore, more likely to be considered for promotions and other advancement opportunities.
Employee benefits: Permanent employees are often entitled to a wider range of benefits than fixed-term ones. These benefits include statutory sick pay, vacation time, and access to company-provided health insurance and retirement plans. The permanent employees mostly get paid holiday.
Job security: As a permanent employee, you have the added security of knowing that your job is not at risk of ending abruptly due to the expiration of a fixed-term contract. This can provide greater job security and allow you to focus on your work without worrying about your contract ending.
Higher salaries and bonuses: Permanent employees may also be eligible for higher salaries and bonuses than fixed-term contracts. This is because the company considers permanent employees a long-term investment and is often rewarded with higher pay and benefits.
In summary, a permanent contract can provide several benefits to employees, including stability, career progression, employee benefits, job security, and higher salaries and bonuses.
Drawback of a permanent contract
While there are several advantages to a permanent contract, there are also some potential drawbacks. Here are some of the most common:
One of the main drawbacks of a permanent contract is that it offers limited flexibility. Once you sign a permanent contract, you are committed to working for the company for an extended period. This can be challenging if you want to take a break from work, switch jobs, or pursue other opportunities.
Limited negotiating power
Another disadvantage of a permanent contract is that it can limit your negotiating power. As a permanent position employee, you may need more leverage to negotiate terms such as salary, benefits, and working conditions. This can be frustrating if you feel that you need to be more fairly compensated or want to change your job.
Reduced opportunities for advancement
A permanent contract may also limit your opportunities for advancement within the company. If you are in a specific role or department, you may have different opportunities for promotions or new responsibilities than those who are not permanently employed.
Limited freedom to explore other career options
Finally, a permanent contract can restrict your freedom to explore other career options. If you are tied to a company for a long period, you may feel less inclined to consider new job opportunities or pursue other interests. This can be frustrating if you want to try new things or take on new challenges.
These are just a few of the potential drawbacks of a permanent contract. It is important to consider all the pros and cons before signing one.
Factors to consider when drafting a permanent contract
When drafting a permanent contract, there are several factors to consider. These include:
Length of the contract
It is important to consider the length of the contract, as it will determine the duration of the employment relationship. A long-term contract may provide more stability and security for the employee, but it may also limit their flexibility and ability to change jobs.
Compensation and benefits
The employee's compensation and benefits should be clearly stated in the contract, including salary, bonuses, vacation time, and additional perks such as healthcare or retirement benefits. It is also important to consider how the employee's compensation will be reviewed and adjusted throughout the contract.
Job duties and responsibilities
The contract should outline the specific duties and responsibilities of the employee, as well as any expectations for performance and career advancement. It is important to be as specific as possible to avoid misunderstandings or disputes later.
Termination and severance
The contract should outline the circumstances under which the employment relationship can be terminated and any severance pay or benefits that may be provided to the employee upon termination.
Non-disclosure and non-compete clauses
Depending on the nature of the job, it may be necessary to include non-disclosure or non-compete clauses in the contract to protect the employer's proprietary information or business interests. These clauses should be carefully drafted to ensure they are reasonable and enforceable.
Governing law and jurisdiction
It is important to specify the governing law and jurisdiction of the contract, as this will determine which laws and legal remedies will apply in the event of a dispute.
These are a few factors to consider when drafting a permanent contract. It is important to consult legal counsel to ensure the contract is valid and enforceable in your jurisdiction.
After reading this guide, you should understand what a permanent employment contract is and what it entails. You also know the benefits and drawbacks of having one.
Overall, a permanent employment contract can be beneficial if used correctly, but it's important to understand all aspects before signing anything.
Frequently Asked Questions
Yes, an employee can terminate a permanent contract, but they must follow the terms of the contract and any applicable employment laws. In many cases, this will involve giving the employer notice of their intention to leave and following any specific procedures outlined in the contract or by law. Employees must understand their rights and responsibilities when ending a permanent contract and seek advice if necessary.
Yes, an employer can terminate a permanent contract under certain circumstances, such as if the employee has committed misconduct or if the company is undergoing financial difficulties and needs to reduce its workforce. In most cases, the employer must provide advance notice or pay severance to the employee. The specific terms of the contract and relevant employment laws will determine the details of the termination process.
With years of experience in the HR field, Carin has a lot of experience with HR processes. As a content marketer, she translates this knowledge into engaging and informative content that helps companies optimize their HR processes and motivate and develop their employees.
Please note that the information on our website is intended for general informational purposes and not as binding advice. The information on our website cannot be considered a substitute for legal and binding advice for any specific situation. While we strive to provide up-to-date and accurate information, we do not guarantee the accuracy, completeness and timeliness of the information on our website for any purpose. We are not liable for any damage or loss arising from the use of the information on our website.
Save time and money
Workforce management software from ShiftbaseTry for free