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Temporary Contract vs Indefinite Contract

  Learn the purpose of each type of contract and decide which one suits your needs as an employer.

Temporary Contract. 
A temporary contract is the one in which both parties agree on a termination date. It can be part-time or full-time.
The reasons for which a job is offered only temporarily may be:
  1. The worker is only needed until the conclusion of a project or work. In this case there is not a specific termination date but, rather, termination conditions ( the work is completed).
  2. Extraordinary increase in workload or production, such as seasonal extra activity, or in order to attend an exceptional order.
  3. temporary substitution of other worker due to sickness, maternity, or other circunstancies.
The reason has to be specified in the contract. Unjustified use of temporary contracts turns the work relationship into indefinite. Workers also become permanent after a period of 2 years working for the company ( or 24 months of work in a period of 30 months).

 

Indefinite Contract.
This is the work contract in which not ending date is specified. It can be part-time or full-time.secretary
This type of contract can also regulate seasonal jobs.
 For example: A camping area opens only 7 months per year. The stuff have indefinite contracts but only works during the period of activities.

 

When the contract is for less hours than the full-time, it must state the number of hours per day, week, month or year and their distribution in a time-table. If this is not observed and specified, the contract will be understood to be full-time. This is also applicable to temporary contracts.

 

Any other type of contract can be transformed into a indefinite contract by agreement in written or ‘de facto’. As stated above, when a company offer ‘temporary contracts’ in a sequence to the same worker without justification the work relationship will be understood ‘indefinite’

 

The indefinite contract is the ideal situation. It promotes stability and a sense of laboral security which will contribute to loyalty to the company and a greater sense of responsibility.
 For this reason there are a number of incentives for companies that enter into a indefinite contract from the beginning of the working relationship.

 

Some of these specially favored indefinite contracts are:

 

  • Indefinite contracts with a young one by a small company or autonomo.
  • Indefinite contracts with a disable person.
These contracts are favored with a reduction in the social security and, in some cases, with tax deductions.
Despite this, employers are sometimes reluctant to enter in an indefinite contract even if they at first do not have ‘temporary conditions.’
Some reasons may be:
  1. Uncertainty regarding the financial capability to support the worker for a long time.
  2. Fear of a more costly redundancy.
In one or the other case, an analysis of pros and cons will determine if  the fears are justified or not.
Some considerations
 
Financing a worker is a heavy load but we are assuming that you already are thinking of employing someone for a number of months. So you count on finance to do that.
Our point of discussing is:
 Is entering into an indefinite contract that risky? What is the cost of failure?
You can always dismiss an employee if things do not go as expected, even if you signed an ‘indefinite contract’.This might  be due to objective reasons, such as a important economical fall, or subjective reasons ( just because you decide so).
Of course, the worker is entitled to consideration ( being notified with some time, though this is not mandatory in every case)  and to a fair compensation. ( a redundancy payment). This is true for temporary contracts too.
The obligation to notify or not depends greatly on the time the work has remained in the company.Some types of indefinite contracts regulates a one-year trial period and during this period, notice in advance is not compulsory.
The cost of the redundancy payment in terms of daily wage per year, depending on the reason for the dismissal, are:
  • End of Contract (properly notified) :9 day of salary per year of work.
  • Dismissal for Objective Reasons :20 days.
  •  Dismissal for Subjective Reasons: 33 days.
  •  Voluntarily leaving: 0 days.

Obvious the first cannot be the case of an ‘indefinite contract’, in the second case, a judge has to declare the reason to be ‘objective’ if the worker does not agree.

If the company decides that it cannot afford the worker anymore and it dismisses him without his agreement, the redundancy payment will be 33days of salary per year of work in the company.

Of course, It would have been better to exactly know when this was going to happen and sign a temporary contract with that ending time. Sure. But unless you can see the future these cases are extremely rare.

The other cheaper option was to stick one temporary contract following to another hoping that it will always be a termination date in the near future in case you want to dismiss with a redundancy of 9 days per year.

But this is illegal and as soon as the worker brings it up to light the company will have to pay the balance, plus assuming the risk involved in being on the spot.

Another consideration to take away unduly fears is that the company needs not to pay ‘finiquito’ if it dismisses the worker during the trial period which can be up to 1 year in some types of indefinite contracts, as mentioned before.

 

In LimitConsulting we can assist you beyond doing your paperwork. Get practical advice.

 

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