Types of Employment Contracts and Their Conditions
One of the most important issues in the business world is contract use. Each type of contract has specific characteristics depending on the nature of the activity involved.
Individuals operating in the labor market are therefore required to possess adequate knowledge of employment contracts and their legal implications.
Basic Concepts in Employment Contracts
Definition of an Employment Contract
Pursuant to Article 7 of the Iranian Labor Law, an employment contract refers to a written or oral agreement under which a worker performs work for an employer for a temporary or indefinite period in return for remuneration. According to Article 2 of the Labor Law, a worker is a person who, at the request of an employer, performs work in exchange for remuneration, including salary, wages, profit sharing, or other benefits.
Under the law, an employer is a natural or legal person for whom a worker performs work in return for remuneration. An employment contract is concluded when the employer and the employee agree on a specific job position. Both parties then sign the contract and define the essential terms governing the scope and nature of the work. This contract serves as a formal legal instrument that provides assurance and clarity for both the worker and the employer.
The issue of employment contracts has always been of particular importance in the business environment. It is therefore advisable for both workers and employers to have accurate and sufficient knowledge of such contracts.
Conditions of an Employment Contract
As noted above, an employment contract is a document that outlines the terms of employment between the employer and the employee.
Like other contracts, an employment contract has two parties: the employer and the worker, or any other title assigned to the person responsible for performing the work.
All matters that may be of concern to either party must be clearly stated in the employment contract, including insurance coverage, salary and wages, job duties, and working hours.
Types of Employment Contracts
There are various types of employment contracts, depending on the terms of the agreement between the worker and the employer. Employment contracts are generally categorized by duration.
Permanent Employment Contracts
In this type of contract, only the commencement date of employment is specified. No end date is defined. Such contracts are concluded for an unlimited and non-temporary period. Permanent employment contracts offer significant benefits for workers and provide greater job security.
According to Note 2 of Article 7 of the Labor Law, work of a continuous nature is considered permanent if no duration is specified in the contract.
Worker dismissal is a key issue in this type of contract. Under the law, termination of employment without a justified reason is not permitted. If an employer seeks to dismiss a worker under a permanent employment contract, the employer must follow the specific legal procedures prescribed by law and must have a valid and justified reason. For this reason, permanent contracts are less favored by employers, who often prefer temporary employment contracts instead.
Temporary Employment Contracts
Another common contract type is the temporary employment contract. Due to the relative ease of concluding such contracts, many employers prefer temporary or fixed-term agreements.
Under this contract, the parties agree to perform work for a limited and specified period. One of the main characteristics of a temporary employment contract is the clear determination of the start and end dates of employment. Accordingly, the employment relationship between the worker and the employer ends on a specific date.
This type of contract is considered a fixed-term contract, and the legislator has established specific conditions to protect workers’ rights. Therefore, the employer and the worker may not agree on wages or benefits that are contrary to or less than those stipulated by law. During the term of the contract, the employer may not dismiss the worker or terminate the contract without the relevant labor authority’s approval.
Hourly Employment Contracts
This type of contract is used for jobs where workers are not required to be present at the workplace full-time. According to Note 1 of Article 35 of the Labor Law, when the performance of work is linked to time, wages are calculated on an hourly basis. If compensation is based on the duration, method, or output of work, it is considered piece-rate pay. When remuneration is determined by the amount of work performed or goods produced within a specific period, piece-rate pay may also be calculated on an hourly basis.
Frequently Asked Questions About Employment Contracts
Under Article 7 of the Labor Law, an employment contract is a written or oral agreement between a worker and an employer under which the worker performs work in exchange for remuneration such as wages, salary, benefits, or profit sharing.
An employment contract has two parties: the worker, who performs work in exchange for remuneration, and the employer, who may be a natural or legal person that requests the work and pays compensation.
Matters such as salary and wages, insurance coverage, job duties, working hours, termination conditions, and other key terms for both parties must be clearly stated in the contract.
In a permanent employment contract, only the start date is specified, and no end date is stated. This type of contract provides greater job security, and termination is permitted only for a justified reason and in accordance with legal procedures.
A temporary employment contract has a defined start and end date. Employers widely use it, and it expires at the end of its term. Termination or dismissal during the contract period is subject to specific legal conditions.
In an hourly employment contract, wages are paid based on hours worked or the amount of work performed. This type of contract is suitable for positions that do not require full-time presence.
A permanent contract has no specified end date and provides greater job security, while a temporary contract has a defined duration and offers greater flexibility for the employer. What is an employment contract?
Who are the parties to an employment contract?
What terms must be included in an employment contract?
What is a permanent employment contract?
What are the characteristics of a temporary employment contract?
What is an hourly employment contract?
What is the difference between permanent and temporary employment contracts?
