There are many different types of employee contracts, and deciding which is the best fit for your business will mean comparing lots of factors. Here’s an overview. One of the biggest expenses a business faces is payroll. For this reason, young and growing companies often manage with a small team juggling lots of extra responsibilities, at least in the early days, and this is one of the reasons it can be so difficult to recruit – as we have explored in an earlier article in this series. However, it doesn’t necessarily have to be this way. Just because a job needs doing, it doesn’t necessarily follow that you need an expensive full-time employee covering the role. There are lots of contract types available, and some things may initially be better suited to different kinds of employees. For example, perhaps you need a new website – you may not necessarily need an in-house web designer, maybe a freelancer would work best for this? Perhaps you need someone to juggle HR, but if it’s not a full-time role maybe a part-time worker would benefit you? Here we explore the different contract options available, where they can be useful, and the tax requirements that go alongside them. If you wish to explore any of these contract types in more detail, information can be found on the government’s website: https://www.gov.uk/contract-types-and-employer-responsibilitiesFull-time and part-time Full-time and part-time employees are essentially the same, with all the same bells and whistles. The difference is what it says on the tin – a full-time employee works longer hours. An employer must provide a contract of employment, holiday allowance, at least minimum wage, statutory sick pay and a payslip. If it should be necessary, maternity, paternity and adoption pay are also required. Fixed-term staff are also entitled to these rights, but the contract is slightly different as it lasts for either a set period of time or until a set task has been completed. Of course, after the fixed-term contract is over, you would have the option of offering full-time employment. Keep in mind that if you offer a full-time permanent contract to an employee, it is a lot harder to get rid of them! Freelancers Freelancers, consultants and contractors are not your employees. They may be employed by another company or be self-employed. They will therefore often look after their own taxes and National Insurance contributions. This can be helpful and cost-effective for an employer. Zero-hours contracts Zero-hours contracts have received their fair share of negative press attention in recent years, although there are advantages and disadvantages on both sides. A zero-hours worker has no set hours, and are paid for the hours they complete. This can make an employee relying on a zero-hours contract very vulnerable if work dries up. They are “on call” but have the right to refuse work, and are entitled to minimum wage. Apprenticeships and internships Internships are like an extending work experience – many people use them to gain experience in their chosen field. They can be low-paid or even unpaid, but this may reflect negatively on the business employing them. Apprenticeships are far more structured – they mix on the job learning with studies, and allow people to start earning money straight away. They will follow a course structure and run for a set amount of time, and they count as qualifications. They can be cost-effective for small businesses, and can also help recruit a new generation of enthusiastic staff. Overall, there are many different things to consider when it comes to deciding what type of contract you will offer for a role. One more thing worth considering is how attractive the role will be – for example, the talent pool for part-time work may be smaller than full-time work, or vice versa. Consider what works best in your industry, and keep an open mind. As long as you do your research and know your tax implications, it might not hurt to remain flexible.
This article is part of a wider campaign called the Scale-up Hub, a section of Real Business that provides essential advice and inspiration on taking your business to the next level. It’s produced in association with webexpenses and webonboarding, a fast-growing global organisation that provides cloud-based software services that automate expenses management and streamline the employee onboarding process.
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