The 4 types of employment contracts in Asia

One of the most important decisions you have to make when hiring a new employee is to decide on the employment status and determine what goes into the employment contract. An employment contract is imperative as it determines the rights, responsibilities and duties of not just the employee but the employer as well.

Generally, employment contracts vary according to the job purpose and the type of employees you are hiring. Four of the common employment contracts used in Asia are full-time, part-time, fixed-term, and independent contractors. To help you decide which contract works best for you, let’s take a closer look at these different types of employment contracts.

In Asia, most employers recognise full-time contracts to be 35 hours or more in a week. Full-time contracts basically offer job positions that are permanent with an agreed amount of salary paid either by monthly, weekly or hourly wages. Most countries in Asia provide legal protection to this type of worker such as the right to be paid a wage equal to or greater than the minimum wages set in each respective country, the right to a certain amount of rest and the right to enjoy insurance coverage or a specific number of benefits.

Full-time contracts allow employees to enjoy job security and stability. In return, you’ll benefit from greater commitment and loyalty from your employees and reduce the risk of losing workers prematurely, especially good talents. Nevertheless, with permanent employees, there is limited flexibility in your workforce. Coupled with employment law protection, it is harder for you to fire or change your talent if the need arises.

Generally, part-time contract employees in Asia work fewer hours than full-time contract employees. In most organisations, they enjoy almost equal protection and benefits as full-time contract employees and are usually also permanent employees of the organisation unless stated otherwise. However, they are usually paid less and their number of work hours are clearly stated in the contracts along with the options of working overtime.

Part-time contracts can be a great way to test employees before actually offering them full-time contracts. It is also good to offer part-time contracts if your company is cutting down on costs as it is understood that part-timers get paid less than their full-time counterparts. Having said that, as they get lesser wages and spend less time at the office, you’ll risk invoking a weaker sense of loyalty or work commitment from these group of employees compared to full-time contract employees.

Fixed term contracts are only use for a certain period of time. For example, for a specific project, or to function as a replacement for another permanent employee who is on a long sick leave. These are non-permanent contracts, therefore you must always state clearly what the terms and length of the employment contract are. In some countries, such as Malaysia, workers employed under fixed-term contracts do receive statutory employment protection while in other countries such as South Korea, they do not receive such privileges.

One of the benefits of having fixed-term contracts is that you have the flexibility to increase manpower for a particular project just for a certain amount of time until the project is complete or as a temporary relief measure when a permanent employee goes on maternity or sabbatical leave. However, one of the major drawbacks of fixed-term contracts is the general loss of productivity among the other employees, as they have to spend time training these temporary workers for every project.

Independent contractors, sometimes known as freelancers, are not permanent employees of an organisation. Instead, they are generally seen as self-employed, having a sense of responsibility to file their own taxes and other social contributions. Contracts for independent contractors vary according to the duration and the type of projects or tasks that are assigned to the contractor and would usually be paid by stages or upon delivery of the work.

Independent contractors are great as an additional resource to the company without having to cater for their entitlements or benefits as most of the Asian countries do not have specific legislative coverage for them. However, as independent contractors are employed on an irregular basis, they would usually manage their own work calendar and are free to refuse any work if it does not fit into their work schedule.

With a variety of employment contracts that you can offer your new employee, it is important to know the difference so that you can craft one that works best for your business. Last but not least, always remember to keep yourself updated with recent legislative amendments to ensure that your management is in compliance with all the latest employment and labour laws in your respective country.