Hiring can be a headache. Especially when your company is relatively new, there’s added pressure to get it right. In this article, we’ll help relieve some of that pressure by explaining the different types of employment contracts, when to use them and how to create high-quality, legally-compliant hiring contracts quickly and affordably. 

Permanent employment contract

An employment contract is an agreement between a full-time employee and a company. It clearly defines the roles and responsibilities of a full-time employee and your company. It protects both the employee and your company. 

The employment contracts you use for your startup should cover everything you’d expect, such as salary, holiday, job roles and responsibilities. Many startups also grant share options to employees as part of their contracts. The exact terms of the contract will vary for each company and employee, but your company can’t set any contract terms which give employees fewer rights than they have under the law of England and Wales, such as the right to paid holidays and the right to earn the National Minimum Wage.

If you don’t have an employment agreement in place for your permanent staff, you could be fined or end up with an additional tax liability from HMRC, so it’s vital that you have proper contracts in place for every staff member.

 Advisor agreements

Many founders like to hire advisors to help them make informed decisions. Advisors are experts in a particular field and can be a valuable source of guidance and industry knowledge. Advisor agreements are contracts between the startup and external advisors, who are typically hired part-time or for a specific project. 

An advisor agreement outlines:

• what you expect from your advisor (such as if you want them to help with networking opportunities or strategic advice)
• what their responsibilities are to the company (such as keeping information confidential)
• what happens if they leave or you terminate the agreement
• vesting schedule for their equity (if any)

Investors like to know that founders have access to specialised knowledge and industry connections, so it’s good to have advisors on board if you’re raising startup funding and as part of their due diligence, investors will want to see the agreements you have in place with advisors. 

Non-executive director (NED) agreements

A non-executive director is someone who serves on your startup's board without being involved in daily operations. 

NEDs aren’t involved in the day-to-day running of the business, but they bring an independent perspective that helps guide the executive directors on strategy and in making strategic decisions. A non-executive director is expected to have broad industry experience as well as specialist knowledge.

To appoint a non-executive director, you’ll need a Letter of Appointment for a Non-Executive Director, which sets out the role and responsibilities of your new non-executive director.

It’s a straightforward document that covers areas such as the non-executive director’s duties, compensation, confidentiality obligations and how the relationship can be terminated.

A non-executive director Letter of Appointment isn’t an employment contract, it’s a contract for services. A non-executive director isn’t an employee of your company.

Zero hours contracts

A zero hours contractor is someone who can work for you as and when you need them, and if they’re available. You’re not obliged to give them work and they don’t have to work for you when you ask them to. Companies sometimes have a pool of zero hours contractors to call on, because not everyone will always be available for work. 

Zero hours contracts clarify your responsibilities as a company, the rights of your casual workers and how you’ll work together. They provide flexibility for both startups and employees. They’re perfect for startups with fluctuating workloads or uncertain staffing needs, plus they help you to be efficient with how you spend money on staffing. 

People employed on a zero hours contract still have certain employment rights. In particular, they’re entitled to receive at least the National Minimum Wage, paid holiday and they must not be unfairly dismissed or discriminated against.

Intern agreements 

An intern is someone who works with a business or company to gain work experience for a specified amount of time – this is called an ‘internship’. An intern may be paid, partially paid, or unpaid.

An Intern Agreement is important because it sets out what both the employer and the intern can expect from the relationship, and includes clauses covering non-disclosure and intellectual property. 

An Intern Agreement:

• forms the basis of the working relationship between the company and the intern
• details the duties, rights and responsibilities on both sides
• sets out the terms, including how much the intern will be paid, where the work should be carried out and how long the agreement will last for

Part time contracts

Part time workers are paid according to the amount of time they work, usually less than that of a permanent employee. The Part-Time Workers Regulations Act states “There is no threshold of working hours that must be met to differentiate between full-time and part time working. This depends on what the employer regards as full-time work”.

Regardless of hours worked, part time staff have the same statutory rights as full time employees. Part time contracts set out the relationship between the worker and the company and should be signed to protect both parties. 

Consultancy agreements

A consultant is someone who provides expert knowledge to your company and usually works on a project basis. 

Consultancy Agreements cover people working for your company who aren’t part of the executive team, long-term advisors or employees. 

Consultancy Agreements are designed for shorter-term engagements of a few months and for people who aren’t considered employees: people not on your payroll and for whom you don’t pay National Insurance. This type of contract is best suited for work that produces a tangible output (deliverables) as opposed to the advisor agreement, which is designed for advice and guidance over the long term. 

The Consultancy Agreement outlines the consultant’s roles and responsibilities, invoicing and payment terms. It’s also a good idea to include an IP assignment clause to retain the IP rights of anything they produce while working for you.

Create team agreements easily 

Hiring a lawyer for all your team agreements can be expensive and time-consuming. That’s why SeedLegals has made it easy and affordable for founders to create and generate team agreements in minutes. 

SeedLegals contracts are designed by lawyers and compliant with UK law. You can customise your contracts using the guided workflow and share, sign and store them on SeedLegals too.

Learn more about team agreements here and if you have questions, book a free call with a SeedLegals expert - the team are always happy to help.