What is a temporary employment contract?
A temporary employment agreement contract is a short-term form of employment. It is a legally binding document that employers and employees must sign before the employee begins working. There is no set ending time for the employment because there are several types of temporary employment contracts, and each one has a different purpose.
Employment contracts for a temporary position can last a few months or it can be a few years, depending on the reasons why the employee is needed. For example, if an employee is needed to fill in while someone is on maternity leave, the temporary employment agreement contract will last until he or she returns.
Some temporary positions are for jobs that need to be done, but the work will not always be there. A manufacturing company may need to hire a temporary worker for three months to help fix machinery. Once the machinery is fixed , there isn’t a need for a temporary worker in that position so the contract will end.
Temporary employment agreements are often called fixed term employment contracts. They outline the terms and conditions of employment as well as the hours and days of the week the employee is expected to work, what happens when the contract ends, and termination procedures.
A permanent employment contract is a legally binding document that outlines the terms and conditions of employment. It is only for employees who have regular shifts every week. Temporary employment contracts are not likely to have any of these details.
When there is a need for a temporary employee, an employer typically does not want to spend time teaching the employee everything about the position. A temporary employment agreement may include all the details about the job, but it will not indicate every detail about working in the company.
Temporary contract features
A temporary employment contract also has a number of key features.
Duration
The temporary contract may be used where the employment is for a specific duration. The law requires the parties to agree an end date or an end event. However, the law provides that the contract, once entered into, should not go beyond 3 calendar years. The law also now requires the parties to agree on when the employment will terminate if no subsequent contract has been entered into. So, for example, if the contract ends because of the completion of the task, the parties should agree when the task is meant to be completed so that there can be no argument whether it was completed or not. An exception to the 3 calendar year rule applies where the temporary contract follows two or more previous contracts to cover a peak workload, or if there is no more than 3 months between contracts.
Terms of work
The law requires that the terms of the temporary contract be agreed in writing by the end of the first day of work. The written agreement should normally incorporate the terms of the permanent contract (where the temporary employee is engaged to fill the role of an absent permanent employee), subject to the temporary employee being given appropriate terms and conditions for the role they are fulfilling. For example, if the temporary employee is filling in during a permanent employee’s maternity leave, the temporary employee should receive the same or similar pay and benefits to those received by the permanent employee during their maternity leave.
Fixed-Term Contracts
If the employment lasts for a fixed period but exceeds 3 months, the temporary employee is entitled not only to the terms of the permanent employee’s role, but also to a set of terms agreed on the assumption that the employment will continue until the end of the contract (for example, a fixed holiday entitlement or commission structure).
Agency Workers
Arrangements with employment agencies can be complex. If a company engages the services of a temporary employee through an agency, the company will become responsible for operating the agency’s pension and information rights. A temporary employee must be paid at least the minimum for the work done and the statutory terms and conditions must be provided. The agency worker will also have some rights under the Agency Workers Regulations 2010 which are additional to the rights referred to above.
Benefits for employer and employee
As regards a temporary employment agreement, there are several advantages for both the employer and employee.
The employer benefits from access to more flexible human resources. A large number of temporary employment contracts allow employers to obtain and keep only the number of workers reasonably necessary to fulfill a specific task. Creation and/or termination of temporary employment contracts are for a fixed duration, which means that in an ideal situation an employer can always expand or reduce its number of workers to meet changes in demand.
More specifically, the employer can now adapt the work hours of its workers without having to lose them. The employer is also not required to pay any worker who has reached the end of his/her contract when business is slow.
The employer can also save money in the short and long term. Indeed, a temporary employment worker is not entitled to paid holidays, paid sick leave and maternity/paternity pay, among other allowances that permanent employees are entitled to. For example, when a permanent employee goes on leave, the employer must replace him/her. The employer must pay either to keep the permanent worker’s job open or to hire a temporary replacement.
On the other hand, the employee benefits from temporary contracts. First, temporary employment contracts allow employees to gain experience and develop skills that might come in handy in other workplaces. They can thus be seen as a stepping stone to entering into the job market. Second, employees remain free to decide when to work. Whenever they wish to increase their income, they can do so by extending the end date of their temporary employment contract or by accepting an additional temporary employment contract with another employer. Third, temporary contracts are less complex than permanent ones, thus allowing workers to spend less energy on paperwork. Finally, when an employee accepts a temporary contract, a temporary agency handles all of the employment formalities.
Legal obligations
Temporary employment contracts must comply with the temporary employment law. Some jurisdictions, like Brazil, increase the complexity of compliance requirements by also requiring contracts to include termination clauses.
The law in Brazil, for example, requires a temporary employment contract to include the duties of the employee and the signature of the manager of the company using the temporary employee. It is also a best practice to document any new responsibilities that the temporary employee may be required to perform .
A temporary employment contract in Brazil can never exceed 90 days and the contract will automatically be renewed once. A temporary employment contract for a private purpose, like helping at a home or personal driver (as opposed to anything related to the business of the employing company) can never exceed 30 days. Like many other jurisdictions, Brazilian law restricts employees with key positions (i.e. CEO) from working on temporary contracts.
You should be cautious when using a package or template employment contract due to the specific requirements in some jurisdictions.
Common mistakes, how to avoid them
As temporary employment laws continue to evolve and municipalities in New Jersey enact more ordinances regulating certain aspects of temporary employment agencies, it is essential for employers to be aware of common mistakes and pitfalls that can result in liabilities for them:
Misclassification of Workers
Agencies may be liable for misclassifying temporary employees as independent contractors, although misclassification also has implications for the client of the agency. Regardless of an employer’s size, temporary employees are entitled to unemployment and disability insurance benefits. Sometimes, individuals are misclassified as "interns" or "trainees" or "professional-service providers," rather than employees, but there are very specific guidelines under those statutes that define when a person qualifies for employment under any of those categories. Employers should make certain to have their relationships with temporary workers evaluated by counsel, particularly individuals who they may want to hire as permanent staffers.
Non-Compliance with Equal Opportunity Laws
Temporary employment agencies fall under the same state and federal EEO and anti-discrimination regulations as their clients. It is vital that temporary employment agencies have policies and procedures in place that are consistent with those laws regarding recruitment, hiring, assignment of employees, harassment, and discipline and termination procedures.
Improper Record Keeping
Under the New Jersey Wage Payment Law, agencies are required to maintain records of hours worked and wages paid to temporary employees (N.J.S.A. 34:11-4.4) and must provide itemized wage statements for each pay period (N.J.S.A. 34:11-4.2) to employees. Agencies also are required to keep records of assigned work hours and pay for temporary workers employed by their clients. Failure to maintain required records may result in administrative fines and liability for fees and costs when administrative fines are assessed for violations of the New Jersey Wage Payment Law.
Paying employees $455 and then misclassifying them as independent contractors can be the perfect recipe for trouble.
When should you use a temporary contract
There are various situations where a temporary contract may be appropriate, such as:
Interim cover
If you’re hiring strictly for interim or temporary cover, a temporary contract can be the right way to go. Though it’s important to be clear that any contract you draw up is strictly for interim cover, the time-limited nature of the contract will protect you from claims of unfair dismissal or redundancy against the terminated employee should you decide not to retain them after the contract expires.
Fixed term
Temporary employment agreements are appropriate when bringing in workers for fixed-term projects, such as seasonal work or to cover an employee who’s on a sabbatical. With that in mind, any targets they achieve during their contract period shouldn’t be compared to the targets of other workers, as doing so could encourage them to feel that they have unfair treatment and in turn file a claim against your business.
Training
Temporary contracting is also an appropriate choice when you’ve got a need to train up an employee in a new role without running the risk of redundancy claims . This is particularly the case if the training lasts for more than a year, in which case you’ll need to provide written notice to the employee that the training is taking place.
In this instance, what’s most important is that this employee is no longer at risk of a claim if the company is forced to make cutbacks.
Other ways of hiring staff
One thing that can’t be ignored is that other options exist in lieu of hiring staff. You could bring on freelance, subcontractors, part-time employees, full-time employees, and/or those on a temporary contract. The most cost-effective choice for your own business will depend on how specific your needs are and how long you’ll be using your staff.
It’s important to remember that you need to be careful about your choice of staff in order to fulfil the law around temporary employment contracts. If it looks like you’re really trying to hire them for permanent roles, you could make yourself liable to claims for unfair treatment.