Employment contracts are agreements that establish an employee-employer relationship. These include the statements and terms including salary, working hours, etc. during the period of employment. Mainly, three types of employment contracts are used by most of the businesses.
1. At-Will Contract
This type of contract specifies that the agreement is at the will of the employer or the employee and it can be terminated by either party, any time, even without a genuine reason.
These types of employment contracts are popularly used in the United States, as they provide flexibility to both employer and employee. Unless it is indicated in the contract, it is presumed as at-will employment contract in most states of U.S.
Although it is not necessary to provide agreement termination notice in at-will contracts, it is a professional conduct, to provide written notification by the employer or the employee, prior to the termination of contract.
2. Fixed-Term Contract
In this type of employment contract, a specific time period is stated, which is agreed by both the parties involved. This contract terminates on the date, which is mentioned in the contract and does not require any prior notification. If both employer and the employee are in terms to continue with the employment relationship, a new contract has to be drafted and executed.
These contracts are mostly preferred by those, who want to enter into an employment association, for a certain purpose or requirement such as a promotional activity, event planners, or on temporary basis to cover for other employees.
3. Executive Contract
This is a contract of employment between an employer and a high-ranking employee such as a vice president or an executive officer. Executive contracts tend to be more complex, because of the presence of high negotiations. Employees of high-level are considered valuable to the organization. These contracts include information about stock options, base compensation, incentives based on performance, successors and Executive contracts cover topics such as performance-based incentives and successors.