Advantages And Disadvantages Of Employment Contract
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Advantages and Disadvantages of Employment Contract

You need to know the advantages and disadvantages of employment contracts as more jobs are being offered on a contract basis in Canada.

However, the position you are hired for must state the specific time it will last. This could be three months, six months, or a year.

There are many good reasons to seek contract employment as part of your work search. Yet, most job seekers only focus on postings that are “permanent” (that is, where you are brought on as a regular employee, and your income taxes and pension plan contributions are deducted by your employer directly from your paycheck).

Thus, they may miss out on the numerous opportunities presented by contract positions.

What Is Contract Employment?

Contract employment means hiring a person for a particular job under specific conditions for a given period.

A contract employee is not a permanent employee and does not for the benefits and privileges that permanent employees enjoy in an organization.

The services to be provided by a contract employee are contained in the employment contract signed by both employer and employee.

All requirements, confidentiality clauses, payment terms, how intellectual property will be treated, employment terms, and termination clauses are contained in the employment contract.

There is always an accompanying statement of work that clearly describes what is to be done, how, when, and quality standards.

Advantages Of Contract Employment

Accepting a job designed to last for a fixed amount of time has benefits.

For one thing, employers consider and value maturity and extensive experience when recruiting for these positions since they want to bring someone who can jump in and do the job with minimal excitement or extra training. So being a little older or over-qualified may work in your favor.

Here are some other positives to consider:

  • You get a chance to impress the employer, and this can lead to an offer to be brought on board full-time as a regular employee;
  • Since you are being paid as a “contractor” instead of as a regular staffer, you may be eligible to deduct a portion of your work-related expenses that you wouldn’t typically qualify for;
  • You have an opportunity to sample several employers by taking on a series of different contracts in a variety of industries;
  • What matters most in a contract position is the results you produce for the employer. Thus, you may not need to get as involved in workplace politics.

What To Watch Out For In Contract Work

While contract work has many upsides, it is not ideal for everyone. In particular, if you do not like re-marketing yourself to a possible new employer toward the end of every contract job, you should probably rethink before accepting a fixed-term position.

Other potential negatives to consider:

  • Since other employees will know that you are only there for a specific amount of time, they may not invite you into their “inner circle” or share as much information with you;
  • You will be paid as a contractor, meaning the employer will not deduct taxes. Therefore, you must ensure to remit your taxes to the government on your own;
  • You may not be offered such ordinary entitlements as vacation pay, benefits, training allowances, and pension contributions made by the employer;
  • You will not receive any severance pay at the end of your contract (unless you have negotiated a provision for this in your employment).

Disadvantages of Contract Employment

Despite the numerous advantages of contract employment, it also has its disadvantages.

Many may think that the ease of contract employment will be free of disadvantages, but that is far from the truth. Below is a list of disadvantages that come with contract employment

Job Security

There is always plenty of job opportunities available for contract employment. Still, the security of such jobs is not guaranteed, and employees prefer to work for organizations that guarantee them job security for their current job.

Most employees do not enjoy working under conditions that do not give them job security, but the stress of looking out for work when still under contract with another employer stops them from looking for another job.

Hence, you work under stress which may lead to inefficiency and, thus, a bad job.

Tax Information

Another disadvantage of those under contract employment is the stress of fulfilling their legal obligation of tax information, calculation and payment.

Those under full-time employment do not bother about this since it is taken care of by the employer, who either deducts the tax before paying or give you the information.

As a contract employee, you must go through all these to avoid tax evasion, a crime punishable by law.

Getting an accurate tax account is complex and may become more tedious than your job.

Brand Creation

Jobs may be available for contract employment, but you must create a good and trusted brand before competing.

The second option is for you to work for less than the big brands to create your own, which can take a lot of time.

Therefore, you must be ready to work for less money for a long time to create a good and trusted brand in your market before you can become available for all the job opportunities and be paid well for your job.

This can lead to frustration and a lack of interest in the job.

Time Management

Another thing you must consider in contract employment is time management, so if you are not good at time management, then contract employment may not be the best option for you.

When you combine two jobs simultaneously, time management becomes an issue. You will begin to prefer one and give less attention to the other, which can lead to inefficiency in your job.

Hence, you must be conscious of your time if you prefer to work under contract employment so as not to do a poor job and ruin your reputation.

Contract Employment Template

An employee contract template formalizes an employment agreement with a new employee.

It contains details like work hours, the rate of pay, the employee’s responsibilities, etc. Both parties keep the template for reference purposes in case of disagreement.

Below you will find an employment contract template:

Employment Contract

This contract, dated on the __ day of ____ in the year 20____, is made between [company name] and [employee name] of [city, state].

This document constitutes an employment agreement between these two parties and is governed by the laws of [state or district].

Contract Employment Lawyer

You may need a lawyer for your contract employment. A lawyer will help to explain the advantages and disadvantages of your contract.

A good lawyer will help you negotiate terms and conditions that protect your interests in the employment situation.

You will need a lawyer for legal backing in your contract so that the lawyer will stand in for you whenever there is a problem.

Who Can Work As A Contract Employee?

Contract employment may or may not be suitable depending on your personality and desire for stability.

On the other hand, a fixed-term job gives you a foot in the door and provides a short-term solution for those currently unemployed.

It allows you to get to know the employer, which could turn into something more “permanent” if it turns out there’s a mutual fit.

Furthermore, the need to job search, again and again, is built right into this type of job position.

Also, your co-workers may view you as a temporary outsider, or you may not be entitled to the kinds of benefits that a regular employee typically receives.

Therefore you should think it through before leaping into a contract job. But if you decide to go for it, you may discover that it’s a great way to earn a living.

Frequently Asked Questions About Employment Contract

What is an employment contract?

An employment contract, also known as a contract of employment, is a written agreement or document signed by both employer and employee which specifies the employment conditions, rights, responsibilities, and duties of an employee. These are known as ‘terms’ of the contract.

Both employees and employers must stick to a contract until it ends or until the terms are changed (usually by agreement between the employee and employer).

How does contract employment work?

Ans. Contract employment is not a permanent job, and employees do not enjoy the benefits given to permanent employees.

Contract employment can last from 3 to 12 months, depending on the agreement reached in the employment contract.

Also, contract employment can be terminated by the employer or employee if any of the parties involved does not meet the contract terms.


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