Employment Contract: The Types You Need to Know

Employees should get an employment contract from the company that hires them. It is an agreement document that shows transparency between the employer and employee.

Therefore, this document should include information about employee’s responsibilities, rights, and other things specifically. Hopefully, it leads the employer and employee to a healthy working relationship.

The structure of an employment contract has been governed by law. Thus, this document has particular requirements to be declared as a legal document. So, what are they? Check the explanation below.

What is an Employment Contract?

In a simple definition, an employment contract is a legal agreement that covers everything about the working relationship between the employer and employee. It usually contains employee’s right, duties, salary information, and other.

Benefits of Having an Employment Contract

Employment agreements or employee contracts are not only viewed as company files, but also as a guide for both parties (employer and employee) in carrying out their duties. Here are some of the advantages of having an employment agreement:

As a formal agreement between employees and employers.
As evidence of each party’s agreement on their respective rights and obligations.
To avoid unanticipated losses.
As prevention of arbitrary action by both parties.
As a way to solve any working issues.

Functions of an Employment Agreement

Still connected to the advantages mentioned above, below are some functions of the employment agreement:

As a guarantee that employees are not taken for granted by a company. – Avoid conflict between both parties.
Guide to solve problems.
Emphasize rights and obligations.

Types of Employment Contracts

There are several types of employment contracts that are commonly used by a company. Here is the list of it.

Oral

Employment agreements can be presented orally. However, this kind of cannot be used as evidence when one of the parties does not do his/her obligation or wants to ask for his/her rights.

Written

Writer working contracts can avoid conflicts such as when one does not do what they should do. This sort of agreement is highly recommended because it protects rights and obligations of the parties.

Work Agreement for a Specific Period of Time (PKWTP)

In Indonesia, this work agreement is addressed for those who have short-term contracts –one to six months working period. This contract is typically created for an internship program. It is used to determine if an employee’s performance is good enough to justify a longer contract.

Work Agreement for Specific Working Hours (PKWT)

In Indonesia, this contract is given to contract employees. The duration of the contract, rights and obligations, position, salary, allowances, facilities, and other topics that regulate personal working relationships between workers and employers are all included in the format for establishing a PKWT work contract.

Work Agreement for an Indefinite Period of Time (PKWTT)

In Indonesia, this contract is addressed for a permanent employee. It does not have a time limit. A PKWTT work contract is defined as a work agreement between an employee and a company to engage into a permanent working relationship.

Employment contracts are critical for both the individual and company. If there are any performance issues, both parties can refer back to the statement in that document.

That is all about employment contracts that you should know. If you are looking for more information related to this topic, you can check them out on the Clockster blog!

Also read: 7 Systems that are Effective to Track Employee Attendance