Employment contract

What it means

An employment contract establishes the employment relationship and must be in writing. Its essential terms are the type of work with a short description, the place of work, the start date and the pay conditions.

Further arrangements sit alongside: probation, a fixed term, part-time hours, a non-compete clause. Each has statutory limits the parties cannot exceed by agreement.

The employment contract is a document; the employment relationship is what arises from it. The relationship starts not on the day of signing but on the start date agreed in the contract. If the employee does not turn up that day without a serious obstacle and gives no notice within a week, the employer may withdraw from the contract.

How it works in practice

Before the start date the employee must be registered with the Social Insurance Agency and a health insurer; contributions and a tax advance are then withheld monthly from pay. Pay may not fall below the minimum wage entitlement for the relevant difficulty level.

Changes to essential terms are made by written amendment. On termination come the holiday settlement, the employment certificate, deregistration with the insurers and the rest of offboarding.

When we review a contract for a client, we check that it fits the work rules or collective agreement where they exist, and that the pay terms can be set up in the payroll software exactly as written - supplements, bonuses, rewards. A contract that payroll cannot read one way only leads to disputes on every payday.

What to watch out for

Where the work is in substance dependent - to instructions, in set hours, with the employer’s tools - it cannot be done under a work agreement or as a sole trader. Inspections judge the substance of the relationship, and arrears are calculated retrospectively with contributions and a penalty.

A probation period must be agreed in writing in the contract when it is concluded. It cannot be added by amendment after the start date, so a missing sentence means the employee can only be let go on the grounds and with the notice periods of an ordinary dismissal with notice, not simply ended during probation.