What is an employment contract?
Employment law (also called labour law) protects people who work for someone else and sets rules for employers. Most countries have an employment code or employment standards act, plus laws on health and safety and on equal treatment.
An employment contract exists when three things are present:
- Work done personally by the employee;
- Pay (wage or salary) from the employer;
- Subordination: the employer gives directions, controls the work and can discipline.
It can be written or oral, but many laws require key terms in writing: job, place, hours, pay, start date, notice.
Employment vs self-employment
A self-employed person or freelancer works for clients under a civil-law contract (contract for services). They choose how to work, carry their own risk and usually do not get paid leave or minimum-wage protection. If someone is treated like an employee (fixed hours, a boss's orders) but given a freelance contract, courts may re-classify it as employment.
Young workers
Most countries set a minimum working age (often 15 or 16), allow only light work for younger teens, ban night and dangerous work for under-18s, and limit their hours.
Types of employment contract
- Permanent (open-ended): the normal form; no end date.
- Fixed-term: for a set time or task, such as a season or covering parental leave. Laws often limit renewals so that permanent jobs are not replaced by chains of short contracts.
- Temporary agency work: the agency is the employer; the client company directs the work.
- Part-time: fewer hours, same rights in proportion.
- Telework (remote work): work from home by agreement; the employer must still respect working time, provide equipment and protect health; some countries give a right to disconnect.
- Probation: a first trial period when either side can end the contract more easily.
Applying for a job
- Documents: a CV (education, experience, skills, contact) and a short cover letter fitted to the job. Be honest and check spelling.
- Interview: prepare examples of what you did, arrive on time, listen, ask a question about the job. Afterwards, ask for feedback and learn from it.
- What the law forbids: employers may not reject you because of sex, religion, ethnicity, disability, age, pregnancy or similar protected grounds. In many countries questions about these are not allowed in an interview.
Rights and duties at work
Employee rights
- Pay at least the legal minimum wage, on time, with a payslip.
- Working time limits (often 40–48 hours a week), daily and weekly rest, overtime paid extra, paid annual leave.
- A safe and healthy workplace: training, protective equipment, the right to refuse truly dangerous work, reporting of accidents.
- Equal treatment: equal pay for work of equal value; no discrimination.
- Freedoms: privacy, freedom of expression and religion within reason, joining a union.
- Protection during pregnancy, parental leave and sickness.
Employee duties
- Do the agreed work personally and with care.
- Follow lawful and reasonable instructions.
- Follow health and safety rules.
- Loyalty: keep business secrets, no unfair competition.
Employer powers and duties
The employer has managerial power (organise work, set rules) and disciplinary power (warnings, and in serious cases dismissal) but must use them fairly, in proportion and following the procedure in law or workplace rules. Employers must pay wages and taxes, keep records, insure workers and prevent risks.
Pay: gross, net and labour cost
- Pay systems: time rate (per hour or month), piece rate (per item), commission, bonuses.
- Gross pay: the amount in the contract.
- Deductions: income tax and employee social insurance (pension, health, unemployment).
- Net pay = gross − deductions: what reaches your bank account.
- Labour cost = gross + employer contributions: what the job costs the firm.
Example with simple rates: gross 3,000; deductions 25% = 750; net 2,250. Employer adds 20% = 600, so the labour cost is 3,600. Real rates differ by country.
Unions and collective agreements
A trade union is an organisation of workers. Through collective bargaining its representatives negotiate with employers or employers' groups. The result is a collective agreement that sets pay scales, hours, leave and procedures for a company or a whole industry. An individual contract usually cannot give less than the collective agreement or the law. Workers also elect staff representatives, and in many countries have a protected right to strike as a last resort.
Ending employment
- Resignation: the employee leaves, giving the required notice.
- Dismissal: the employer ends it. It needs a valid reason (serious misconduct, poor performance after warnings, or economic reasons such as closing a department), a fair procedure (a meeting, a chance to explain, written notice), a notice period or pay instead, and often severance pay. Dismissal for a discriminatory reason, for joining a union or for reporting wrongdoing is unlawful.
- Mutual agreement: both sides agree to end it.
- End of a fixed term, retirement, or death.
A dismissed worker can challenge an unfair dismissal at a labour court or tribunal.
Ethics at work: codes of conduct and mobbing
Many firms have a code of ethics: rules on honesty, conflicts of interest, gifts, data protection and respect. Unethical behaviour includes lying to customers, taking bribes, stealing time or materials, and hiding safety problems.
Mobbing (workplace bullying)
Mobbing is repeated, long-lasting hostile behaviour aimed at a person: humiliation, isolation, spreading rumours, giving pointless or impossible tasks. It harms health and is unlawful in many countries. What to do: keep a dated record, talk to a trusted colleague, report it to a manager, HR, a staff representative or an ethics hotline, and if needed the labour inspectorate or court. Employers must prevent it and protect people who report it.
Try it
Look at a real job advert online. List: contract type, hours, pay (gross or net?), and one right the law gives you that the advert does not mention.
Key formulas and definitions
- Employment = work + pay + subordination (direction)
- Net pay = gross pay − tax − employee social insurance
- Labour cost = gross pay + employer contributions
- Contract types: permanent, fixed-term, agency, part-time, telework
- Fair dismissal = valid reason + fair procedure + notice
- Mobbing = repeated, long-lasting harassment at work
Worked examples
1. Riya delivers food. The app sets her hours, prices and routes, and blocks her if she refuses orders. Her contract says "independent partner". Is she likely an employee?
Possibly yes. The key test is subordination: if the company directs and controls the work and can punish her, courts in many countries treat this as employment despite the label.
2. Gross monthly pay is 2,000. Deductions are 25% and employer contributions are 20%. Find net pay and labour cost.
Deductions = 500, so net = 1,500. Employer contributions = 400, so labour cost = 2,400.
3. A worker is fired the same day for being 10 minutes late once, with no warning. Is this fair?
Usually not: the reason is not serious enough and no fair procedure (warning, chance to explain, notice) was followed. It is likely an unfair dismissal.
4. A café wants a waiter for June to August only. Which contract fits?
A fixed-term (seasonal) contract that ends at the end of August.
Common mistakes
- Thinking a contract must be written to exist. An oral agreement with work, pay and direction can still be employment.
- Confusing gross and net pay. Net is what you receive after tax and social insurance.
- Believing an employer can order anything. Instructions must be lawful, reasonable and within the job.
- Calling every argument at work mobbing. Mobbing means repeated, long-lasting hostile behaviour aimed at a person.