Types of Employment Contracts: A Guide for SMEs in Jersey

Recruiting and retaining staff can be a challenging endeavour for small and medium-sized enterprises (SMEs), particularly in industries such as hospitality and construction. Striking a balance between attracting the right talent and maintaining flexibility is crucial for SMEs looking to optimise their workforce without placing undue stress on permanent wage bills. In this context, selecting the appropriate employment contract becomes paramount. It sets the foundation for a successful employer-employee relationship. If the contract does not provide the employer with the protection but also the flexibility required, this can lead to (potentially) expensive issues down the line.

This article sets out the options available to employers.

Permanent Contracts

For full-time, year-round, permanent roles, the standard choice is a permanent contract of employment. This type of contract has no expiration date, binding both employer and employee until termination. Permanent employees enjoy the highest level of job security and, after a successful probation period, gain access to various benefits offered by the employer. While permanent contracts foster loyalty and long-term resource development, employers should be aware of potential downsides, including higher recruitment costs and stronger employment rights for permanent staff.

Fixed Term Contracts

Fixed term contracts offer flexibility for both employers and employees by specifying a set period of employment, either terminating on a specified date or after the completion of a particular project. Ideal for seasonal or casual work, as seen in the hospitality, agriculture, or tourism sectors, these contracts provide a balance between flexibility and structure. Employers should be cautious, however, as certain rules apply, including notice obligations, pro-rated paid leave, and potential claims for unfair dismissal if contracts are not renewed appropriately. If a particular fixed term contract is renewed on a number of occasions, this may also lead to an employee accruing continuous service. This may result in an employee accruing the requisite period of continuous service to enable them to bring proceedings for various claims before the Employment and Discrimination Tribunal.

Temporary Contracts

Similar to fixed-term contracts, temporary contracts serve specific needs or projects without intending to establish a permanent position. The key difference lies in the uncertainty of the precise end date or conditions leading to termination. While offering flexibility, temporary contracts share similar advantages and disadvantages with those of fixed-term contracts. The main trade-off is the consideration between flexibility and long-term job security.

‘Zero-Hours’ Contracts

‘Zero-hours’ contracts have gained attention in recent years. The terms of service are defined, but the employer is not obligated to provide any work to the employee under this contractual arrangement. These contracts are beneficial when specific skills are needed, but the quantity and timing of the work are uncertain. While providing high flexibility for employers, they come with the risk that employees may decline work when asked, potentially leaving employers with tasks and no available workforce. Since May 2022, the Employment Law prohibits zero hours contracts from containing exclusivity clauses (which had previously been used to stop a zero hours employee from also being employed by another business; or requiring an employee to obtain the employer’s permission to be employed by another business).

Request to Amendments to Contract – Recent Developments in the States Assembly

On 17th January 2024, the States Assembly adopted the Employment (Amendment No.15) (Jersey) Law 202- (the “Amendment Law”). When enacted it will grant an employee (regardless of length of service), whose contract of employment permits flexibility in terms of hours or place of work, the right to request an amendment to their contract if, 6 months prior to that request, they have engaged in a settled work pattern (whether formally agreed with their employer or not). The request can only relate to amending the contract of employment so as to reflect the settled work pattern. Such a right can only be invoked once in a 12 month period.

Key Takeaways

It is crucial for both employers and employees in Jersey to carefully consider their goals in an employment relationship, to enable them to opt for the most suitable contract type. For permanent roles, utilising the probation period is essential for assessing the compatibility of the relationship. In temporary roles, clarity about the nature, extent, and end of the engagement is vital from the outset. Regular assessments should determine whether to renew or transition a role from a fixed-term to a permanent contract, ensuring that each case is evaluated individually. Choosing the right employment contract is a strategic decision that lays the groundwork for a successful and mutually beneficial professional relationship.