{"id":16068,"date":"2020-04-23T13:22:39","date_gmt":"2020-04-23T11:22:39","guid":{"rendered":"https:\/\/factorialhr.com\/blog\/?p=16068"},"modified":"2025-04-24T15:58:10","modified_gmt":"2025-04-24T13:58:10","slug":"everything-about-a-permanent-contract","status":"publish","type":"post","link":"https:\/\/factorialhr.com\/blog\/everything-about-a-permanent-contract\/","title":{"rendered":"Everything You Need To Know About A Permanent Contract"},"content":{"rendered":"<p>Have you heard the phrase, \u201cif it\u2019s not written down, it didn\u2019t happen\u201d? Though some people work without written contracts in the US, it is safer for employees and employers to have the terms of their agreement down on paper.<\/p>\n<p>As we\u2019ve discussed when <a href=\"https:\/\/factorialhr.com\/blog\/types-of-employment-contracts\/\" target=\"_blank\" rel=\"noopener noreferrer\">reviewing contract types,<\/a> there are three types of contracts: fixed-term contracts for temporary workers who are working a set amount of time usually to complete a specific project; casual contracts, for employees who don\u2019t have a set number of hours; and permanent contracts, for long-term employees filling necessary positions.<\/p>\n<p>A permanent contract is the most common type of contract in the US, and for good reason: they help employers hold on to skilled workers. Permanent employees do their jobs effectively knowing they have job security and opportunities for career growth.<\/p>\n<p>Here we\u2019ll cover everything you need to know about permanent contracts.<\/p>\n<ul style=\"list-style-type: circle;\">\n<li><a href=\"#whatis\">What is a permanent contract?<\/a><\/li>\n<li><a href=\"#whatare\">Advantages and disadvantages of a permanent contract<\/a><\/li>\n<li><a href=\"#included\">What is covered in a permanent employment contract?<\/a><\/li>\n<li><a href=\"#considerations\">Further considerations for permanent employment contracts<\/a><\/li>\n<li><a href=\"#legal\">Legal Regulations for permanent contracts<\/a><\/li>\n<li><a href=\"#endcontract\">Breaking a permanent contract<\/a><\/li>\n<li><a href=\"#manageemployees\">Managing permanent employees<\/a><\/li>\n<\/ul>\n<p><center><!--HubSpot Call-to-Action Code --><span id=\"hs-cta-wrapper-194b4c3b-7a4b-4f33-83a3-ef1642c88a82\" class=\"hs-cta-wrapper\"><span id=\"hs-cta-194b4c3b-7a4b-4f33-83a3-ef1642c88a82\" class=\"hs-cta-node hs-cta-194b4c3b-7a4b-4f33-83a3-ef1642c88a82\"><!-- [if lte IE 8]>\n\n\n<div id=\"hs-cta-ie-element\"><\/div>\n\n\n<![endif]--><a href=\"https:\/\/cta-redirect.hubspot.com\/cta\/redirect\/4960096\/194b4c3b-7a4b-4f33-83a3-ef1642c88a82\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" id=\"hs-cta-img-194b4c3b-7a4b-4f33-83a3-ef1642c88a82\" class=\"hs-cta-img\" style=\"border-width: 0px;\" src=\"https:\/\/no-cache.hubspot.com\/cta\/default\/4960096\/194b4c3b-7a4b-4f33-83a3-ef1642c88a82.png\" alt=\"Download employment contract template\" \/><\/a><\/span><script charset=\"utf-8\" src=\"https:\/\/js.hscta.net\/cta\/current.js\"><\/script><script type=\"text\/javascript\"> hbspt.cta.load(4960096, '194b4c3b-7a4b-4f33-83a3-ef1642c88a82', {\"region\":\"na1\"}); <\/script><\/span><!-- end HubSpot Call-to-Action Code --><\/center><br \/>\n<img decoding=\"async\" class=\"size-full wp-image-15597 aligncenter\" src=\"https:\/\/factorialhr.com\/wp-content\/uploads\/2020\/04\/16141933\/types-of-employment-contracts.jpg\" alt=\"types of employment contracts\" width=\"795\" height=\"450\" \/><\/p>\n<h2><a name=\"whatis\"><\/a><strong>What is a permanent contract?<\/strong><\/h2>\n<p>Unliked fixed-term or casual contracts, the permanent contract definition is a contract that will not expire, but remain valid until either employer or employee chooses to end the relationship. These are often called indefinite contracts as well. Some permanent staff may receive contracts valid for one, three, or five years but with the expectation that they will be renewed. Employers tend to invest their resources in their permanent employees by actively recruiting top talent, training and integrating them into the community and offering substantial benefits.<\/p>\n<p>Full time permanent employees work between 35 and 40 hours a week, while part time employees with a permanent part time contract work under 35 hours.<\/p>\n<h2><a name=\"whatare\"><\/a><strong>What are the disadvantages &amp; advantages of a permanent contract?<\/strong><\/h2>\n<p>There are many permanent contract advantages which will appeal to employees and help employers hoping to attract and retain talent. We\u2019ll also touch on some of the disadvantages below.<\/p>\n<h3><strong><span style=\"text-decoration: underline;\">Advantages<\/span><\/strong><\/h3>\n<h4><strong>Job security<\/strong><\/h4>\n<p>The stability of having a permanent job is very appealing to employees. It eases their mind and allows them to invest themselves emotionally in the business, improving morale and boosting employee engagement.<\/p>\n<h4><strong>Benefits<\/strong><\/h4>\n<p>Offering benefits like health insurance, paid time off, and 401(k) contribution matching is a key opportunity for employers to entice talented workers to join the team. Helping employees to strike a work-life balance will ensure employee satisfaction and effectiveness.<\/p>\n<h4><strong>Career development opportunities<\/strong><\/h4>\n<p>Being offered a permanent contract shows employees that this isn\u2019t just a job, but a career. Instead of burning cash by recruiting and training staff that doesn\u2019t stick around, it is better for businesses to invest in people who can build toward the company\u2019s future. Permanent contracts keep top talent around long-term while helping employees to develop new skills and grow their careers. It\u2019s a win-win!<\/p>\n<h3><strong><span style=\"text-decoration: underline;\">Disadvantages<\/span><\/strong><\/h3>\n<h4><strong>Greater liability<\/strong><\/h4>\n<p>While a permanent contract of employment will provide the clarity by outlining unilaterally the terms of the agreement, it may make employers liable for greater damages if they should violate the contract. Employers must be careful not to agree to terms they cannot meet.<\/p>\n<h4><strong>More administrative work<\/strong><\/h4>\n<p>While someone working as a contractor organizes their own health insurance, retirement savings plans and savings for time off, permanent employees are supplied these through their employer. Growing businesses need to make sure their Human Resources department grow commensurately.<\/p>\n<h2 style=\"text-align: center;\"><a href=\"https:\/\/factorialhr.com\/blog\/download-free-employment-contract-template\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"color: green;\">Download Your Free Permanent Contract Template<\/span><\/a><\/h2>\n<p><img decoding=\"async\" class=\"size-full wp-image-16073 aligncenter\" src=\"https:\/\/factorialhr.com\/wp-content\/uploads\/2020\/04\/23131426\/permanent-employee-contract.jpg\" alt=\"permanent employee contract\" width=\"795\" height=\"450\" \/><\/p>\n<h2><a name=\"included\"><\/a><strong>What is usually in a permanent employment contract?<\/strong><\/h2>\n<p>A permanent work contract is meant to lay the groundwork for a long and fruitful relationship. This means that these contracts have a lot to cover! Here, we\u2019ll discuss eight key ingredients of a permanent contract.<\/p>\n<h3><strong>1) <span style=\"text-decoration: underline;\">Job Title<\/span><\/strong><\/h3>\n<p>It is conventional though not legally necessary to specify a job title which reflects the work the employee will be doing. This will determine how employees represent themselves and the company to others..<\/p>\n<h3><strong>2) <span style=\"text-decoration: underline;\">Job Description<\/span><\/strong><\/h3>\n<p>While not all contracts contain job descriptions, including one can help to clarify expectations. Job descriptions should be neither too specific (to allow for changes) nor too broad (so that an employee doesn\u2019t end up with more responsibility than they can handle). Stick to the basics such as to whom the new hire will report and how performance will be evaluated.<\/p>\n<p>This is also an useful moment to \u201cclassify\u201d new hires as permanent employees rather than contract workers to ensure tax and insurance compliance. This may seem obvious, but <a href=\"https:\/\/www.nytimes.com\/2015\/06\/18\/business\/uber-contests-california-labor-ruling-that-says-drivers-should-be-employees.html\" target=\"_blank\" rel=\"noopener noreferrer\">Uber has faced many lawsuits<\/a> due to employment misclassification!<\/p>\n<p>It may be worth spelling out that the position is full time or part time and making clear if employee can or cannot engage in other business activities on the side.<\/p>\n<h3><strong>3) <span style=\"text-decoration: underline;\">The Term<\/span><\/strong><\/h3>\n<p>How long will employment last? If a contract specifies a limited period of time, employers need to clarify if and when the contract can be renewed. Renewals can be automatic, one-way, or joint. Those negotiating salary from contract to contract must be sure to begin the discussion well before the term of the contract expires.<\/p>\n<p>It\u2019s important to note that although an agreement may provide a term of employment, neither party is obligated to adhere to it. As we\u2019ll discuss below, most states in the U.S. are \u201cat-will.\u201d If an employee quits before the end of the contract, no court will order the employee to keep working or allow the employer to collect damages.<\/p>\n<p>Other permanent agreements have no fixed term but provide provisions for payments in the case of notice or severance.<\/p>\n<h3><strong>4) <span style=\"text-decoration: underline;\">Base Compensation and Bonuses<\/span><\/strong><\/h3>\n<p>A permanent contract should include the annual salary or hourly rate of the employee, as well as information about raises, bonuses, or incentives.<\/p>\n<p>There are usually two types of bonuses\u2013 guaranteed and discretionary. A discretionary bonus usually an indicator of employer satisfaction and may be based on performance. The contract should contain information on the criteria for receiving discretionary bonuses and specify what will determine if targets have been met.<\/p>\n<h3><strong>5) <span style=\"text-decoration: underline;\">Benefits<\/span><\/strong><\/h3>\n<p>Explain what benefits the plan include such as medical, dental and eye care, as well as information about the 401(k) plan, stock options and any fringe benefits.<\/p>\n<p>Employers should be sure to thoroughly explain the time off policy. How are paid vacation days allotted or accrued? Can employees make up hours? How will overtime renumerated? Minimum leave requirements <a href=\"https:\/\/factorialhr.com\/blog\/paid-time-off-usa\/\" target=\"_blank\" rel=\"noopener noreferrer\">vary by state<\/a> so businesses should make sure their policies are compliant with local regulations.<\/p>\n<p>Perks ranging from travel expenses and reimbursements to club memberships and company cars will also need outlining.<\/p>\n<h3><strong>6) <span style=\"text-decoration: underline;\">Termination<\/span><\/strong><\/h3>\n<p>A permanent contract should contain stipulations for early termination of the contract. Depending on how the relationships ends, the employer might have different obligations to the employee. Explain what is required for either party to terminate the relationship, including the amount of notice required and if it should be written.<\/p>\n<p style=\"text-align: center;\"><a href=\"https:\/\/factorialhr.com\/payroll-summary\"><img decoding=\"async\" class=\"alignnone wp-image-15793 size-full\" src=\"https:\/\/factorialhr.com\/wp-content\/uploads\/2020\/04\/20115623\/usa-payroll-optimized.gif\" alt=\"usa payroll\" width=\"795\" height=\"450\" \/><\/a><\/p>\n<h3><strong>7) <span style=\"text-decoration: underline;\">Restrictive Covenants<\/span><\/strong><\/h3>\n<p>In certain industries, like the financial, tech and pharmaceutical fields, employers may include clauses in employee agreements restricting the information an employee can share and what they can do during and after their contracts.<\/p>\n<h4><strong>Confidentiality agreement<\/strong><\/h4>\n<p>This clause will prevent the employee from sharing the employer\u2019s trade secrets or intellectual property.<\/p>\n<h4><strong>Non-compete clause<\/strong><\/h4>\n<p>An employer may restrict an employee\u2019s ability to work for a competitor with this clause. It cannot be open-ended and must state a limited period after which the employee can do what they like.<\/p>\n<h4><strong>Non-solicitation clause<\/strong><\/h4>\n<p>This clause will prevent an employee who has resigned from poaching customers or other employees from their previous employer.<\/p>\n<h4><strong>Intellectual property<\/strong><\/h4>\n<p>Employers may wish to specify that any intellectual property the employee creates during their tenure belongs to the company and not the individual.<\/p>\n<h3><strong>8) <span style=\"text-decoration: underline;\">Legal Boilerplate<\/span><\/strong><\/h3>\n<p>Permanent employment contracts should include legal provisions which will ensure their validity. Some useful boilerplate might address the following:<\/p>\n<h4><strong>Governing Law<\/strong><\/h4>\n<p>Businesses headquartered in one state with offices in another should identify which of the states laws they will settle disputes in.<\/p>\n<h4><strong>Arbitration<\/strong><\/h4>\n<p>Parties can choose whether to arbitrate any future disputes. Employers often demand arbitration because it is cheaper and faster than courts, and is kept confidential.<\/p>\n<h4><strong>Entire Agreement<\/strong><\/h4>\n<p>Both parties can agree that the written contract constitutes the \u201centire agreement,\u201d and will not be able to invoke previous <a href=\"https:\/\/factorialhr.com\/blog\/types-of-employment-contracts\/#written\" target=\"_blank\" rel=\"noopener noreferrer\">implied or verbal contracts<\/a>.<\/p>\n<p><a href=\"https:\/\/factorialhr.com\/document-management\"><img decoding=\"async\" class=\"alignnone wp-image-12093\" src=\"https:\/\/factorialhr.com\/wp-content\/uploads\/2020\/02\/11182630\/docs-2.png\" alt=\"document manager\" width=\"1200\" height=\"148\" \/><\/a><\/p>\n<h2><a name=\"considerations\"><\/a><strong>From temporary to permanent contracts<\/strong><\/h2>\n<p>Not all permanent employees start off with a permanent contract. What are the temporary to permanent employment rules?<\/p>\n<h3><strong><span style=\"text-decoration: underline;\">Probation<\/span><\/strong><\/h3>\n<p>To make sure a new hire is up to snuff, an employer might ask an employee to sign a fixed-term contract for a three-month probation period. The employer will use the probation period to determine if the employee is a good cultural fit for the company. The trial term can confirm whether the employee is able to perform their responsibilities.<\/p>\n<p>Such a probation may be structured so that the employer can terminate the employee without providing reasonable notice or compensation. If the employer would like to hire the employee long-term at the end of the period, the employee will switch from a fixed term contract to a permanent contract.<\/p>\n<h3><span style=\"text-decoration: underline;\"><strong>Temp to perm jobs<\/strong><\/span><\/h3>\n<p>Sometimes a worker placed through a temporary or permanent recruitment agency or hired as a contractor will impress their boss and win a permanent position. Even if management doesn\u2019t offer a permanent contract themselves, temporary workers can send a contract to permanent position letter asking to change their contract to a permanent one.<\/p>\n<h2><a name=\"legal\"><\/a><strong>Legal considerations for permanent contracts<\/strong><\/h2>\n<p>As long as employees are receiving the federal minimum wage, there are few other federal laws governing employment agreements. There are still several legal factors to take into consideration.<\/p>\n<h3><span style=\"text-decoration: underline;\"><strong>At-will agreements<\/strong><\/span><\/h3>\n<p>In most states, employment contracts are considered to be \u201cat-will\u201d agreements. This means that both employers and employees can sever the relationship at any time without legal repercussions. Discriminatory practices are not protected by this agreement. Public sector and union workers may have a negotiated contract which exempts them from \u201cat-will\u201d agreements. For more information on these types of agreements, you can refer to the article on <a href=\"https:\/\/factorialhr.com\/blog\/types-of-employment-contracts\/\" target=\"_blank\" rel=\"noopener noreferrer\">USA contract types<\/a>.<\/p>\n<h3><span style=\"text-decoration: underline;\"><strong>State Laws<\/strong><\/span><\/h3>\n<p>State laws governing contracts vary widely. In New York State, for example, an employer doesn\u2019t need to pay an employee\u2019s accrued vacation time if they leave before completing 12 months of work. However, this isn\u2019t the case in Massachusetts. Non-compete provisions are legal in every state except California, while other states limit the restriction to varying degrees, accepting one, two, or three year maximums to a non-compete clause.<\/p>\n<p>Businesses need to do their homework into order to understand how state law might dictate (or override) the terms of their contract.\u00a0 They should also make sure to investigate state guidelines for paid time off, minimum wage and notice.<\/p>\n<p><center><!--HubSpot Call-to-Action Code --><span id=\"hs-cta-wrapper-194b4c3b-7a4b-4f33-83a3-ef1642c88a82\" class=\"hs-cta-wrapper\"><span id=\"hs-cta-194b4c3b-7a4b-4f33-83a3-ef1642c88a82\" class=\"hs-cta-node hs-cta-194b4c3b-7a4b-4f33-83a3-ef1642c88a82\"><!-- [if lte IE 8]>\n\n\n<div id=\"hs-cta-ie-element\"><\/div>\n\n\n<![endif]--><a href=\"https:\/\/cta-redirect.hubspot.com\/cta\/redirect\/4960096\/194b4c3b-7a4b-4f33-83a3-ef1642c88a82\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" id=\"hs-cta-img-194b4c3b-7a4b-4f33-83a3-ef1642c88a82\" class=\"hs-cta-img\" style=\"border-width: 0px;\" src=\"https:\/\/no-cache.hubspot.com\/cta\/default\/4960096\/194b4c3b-7a4b-4f33-83a3-ef1642c88a82.png\" alt=\"Download employment contract template\" \/><\/a><\/span><script charset=\"utf-8\" src=\"https:\/\/js.hscta.net\/cta\/current.js\"><\/script><script type=\"text\/javascript\"> hbspt.cta.load(4960096, '194b4c3b-7a4b-4f33-83a3-ef1642c88a82', {\"region\":\"na1\"}); <\/script><\/span><!-- end HubSpot Call-to-Action Code --><\/center>&nbsp;<\/p>\n<h2><a name=\"endcontract\"><\/a><strong>Breaking a Permanent Contract<\/strong><\/h2>\n<p>Can you leave a permanent work contract? Yes! There are a number of ways a permanent contract can end. Remember that most employee agreement in the US are \u201cat-will,\u201d which means there are no legal penalties for ending a contract early although there may still be financial repercussions.<\/p>\n<h3><span style=\"text-decoration: underline;\"><strong>Resignation<\/strong><\/span><\/h3>\n<p>It is standard that if an employee terminates the contract by resigning, they receive nothing other than their salary through the last day worked plus accrued vacation. The contract may or may not entitle resigning employees to full or prorated portions of their commissions, guaranteed bonus, or payment for completed work.<\/p>\n<h3><span style=\"text-decoration: underline;\"><strong>Termination<\/strong><\/span><\/h3>\n<p>If an employer chooses to end the relationship, the termination will fall into two categories outlined in the contact: &#8220;for cause&#8221; or \u201cwithout cause.\u201d Termination can be considered \u201cfor cause\u201d if the employee is accused of intentional misconduct, insubordination, job abandonment or breach of contract. \u201cFor cause\u201d termination means employees get no additional remuneration<\/p>\n<p>A &#8220;without cause&#8221; termination will offer employees a period of payment, often ranging from a few weeks to a year. In effect, the fixed term of the contract then converts into a severance agreement.<\/p>\n<h2><a name=\"manageemployees\"><\/a><strong>Managing permanent employees<\/strong><\/h2>\n<p>Whew! It\u2019s a long journey, but all the effort that goes into making a permanent contract finally paid off: A permanent position has been filled by a talented worker! The next step is to make sure that your business keeps up its end of the bargain. You can do this by providing the salary and benefits promised in the contract. This is not only vital to limit legal liability, but will have the added benefit of keeping works invested and engaged.<\/p>\n<p>Human resources departments manage the employee life cycle from recruitment to exit interviews. HR will send out the permanent contract for an <a href=\"https:\/\/factorialhr.com\/digital-signature\">electronic signature<\/a> and then be responsible for keeping its terms. They will track employee working hours, time off and absence requests as well as manage payslips and documents. It\u2019s a lot of work! <a href=\"https:\/\/factorialhr.com\/\">Factorial\u2019s all-in-one software<\/a> can make sure your HR department has the resources it needs to keep everything in order&#8211; and adherent to the terms of the contracts signed.<\/p>\n<p>A streamlined HR department will improve employee morale and retention, so you can hang on to those permanent employees you\u2019ve worked so hard to sign.<\/p>\n<h2 style=\"text-align: center;\"><a href=\"https:\/\/factorialhr.com\/document-management\"><span style=\"color: green;\">Manage Employee Documents w\/Factorial&#8217;s document management &amp; E-Signature tool [Try it free]<\/span><\/a><\/h2>\n<p><em>Written by\u00a0<\/em>Valerie Slaughter;\u00a0<em>Edited by<\/em> Tanya Lesiuk<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Have you heard the phrase, \u201cif it\u2019s not written down, it didn\u2019t happen\u201d? Though some people work without written contracts in the US, it is safer for employees and employers to have the terms of their agreement down on paper. As we\u2019ve discussed when reviewing contract types, there are three types of contracts: fixed-term contracts<a href=\"https:\/\/factorialhr.com\/blog\/everything-about-a-permanent-contract\/\" class=\"read-more\"> [&#8230;]<\/a><\/p>\n","protected":false},"author":136,"featured_media":15751,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[146],"tags":[],"class_list":["post-16068","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-legal-hr"],"acf":{"topics":false},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v21.5 (Yoast SEO v21.9.1) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Everything You Need To Know About A Permanent Contract | Factorial<\/title>\n<meta name=\"description\" content=\"Your comprehensive guide, covering everything you need to know about a permanent contract. 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