Employment relationship

What it means

An employment relationship is founded by a written employment contract and arises on the day the parties agreed as the starting day, not on the day of signature. The contract must state the type of work, the place of work, the starting day and the pay terms.

What separates it from agreements outside employment is the protection: grounds for notice, paid holiday and severance exist only here. The Labour Code states plainly that dependent work cannot be performed under a trade licence or any contract outside labour law.

Part-time work under shorter working time is an employment relationship too. An employee on half hours has the same protection against dismissal, holiday entitlement and other rights as a full-time colleague; only pay and some entitlements are calculated pro rata. It is not a weaker form of employment, as is sometimes assumed.

How it works in practice

It is agreed for an indefinite term, or for a fixed term of at most two years with a limited number of renewals. The employee must be registered with the Social Insurance Agency before the work actually begins, and the health insurer notified within the statutory period.

The payroll file opens immediately: personnel folder, payroll record, the declaration for taxing employment income and the initial health and safety training. A probationary period runs for at most three months, longer for managers, and the parties cannot lengthen it afterwards.

For a foreign national from outside the EU we check before the contract is signed that they hold a residence and work permit matching the job and the employer. The rules on employing foreign nationals and the notification duties towards the labour office come on top of the usual registration with the insurers.

What to watch out for

A registration filed with the Social Insurance Agency in the afternoon for someone who started work that morning is illegal employment. The fine for it has a statutory floor, so it cannot be argued down to a token amount even where the wage and the levies were duly paid in the end.

A fixed-term relationship renewed more often than the law allows is treated as agreed for an indefinite period. An employer who then ends it on expiry of the term has in fact no valid termination of employment, and if it comes to a dispute may owe the employee wage compensation for the whole time the dispute lasts.