Flexibility

A business will benefit from greater flexibility when choosing short-term or limited time contracts (such as temporary contracts, zero-hour contracts, freelance contracts or seasonal contracts). These contracts allow the business to employ staff only when they are needed (busy periods of the year, to work on a specific project, to provide cover for a member of staff on leave, etc) and there is no permanent commitment involved.

Permanent contracts offer less flexibility, as the business is committed to employing and paying members of staff each month, even if perhaps some weeks or months, there may be limited work for these members of staff. Permanent contracts also tend to include a period of notice which must be given by the employee or by the business if the contract is to be ended – for example, if the employee decides to leave, they may be required to continue working for 2 or 4 additional weeks before they are able to move to another job.

Efficiency

Efficiency is all about how productive and effective a business can be, in relation to the time, money and resources that are put into the business. In terms of employment contracts, you can see that permanent contracts can have a positive impact on efficiency – permanent members of staff will be trained to understand the business’ policies and processes, they will understand the aims and objectives of the business and be motivated to help the business achieve success. They are paid each month for their work, enjoy greater job security and also receive additional benefits, such as holiday pay and pension schemes.

On the other hand, flexible contracts (such as zero-hour or seasonal contracts) could have a negative impact on efficiency. Staff employed on these types of contracts may change regularly and therefore are less likely to understand processes, aims, objectives, etc. They also have fewer benefits attached to their employment contract, and therefore may be less motivated to perform effectively.

Costs

Permanent contracts can give a business a certain amount of control over costs – the business knows how much money will be paid each month in salary payments, as they are the same every month. Flexible contracts can sometimes lead to larger wage bills in certain months – for example, if lots of seasonal staff are employed for a couple of months – and the business will need to plan for this additional cost and make sure the wage bills can be paid.

Zero-hour contracts can give a business flexibility in terms of managing/controlling their employment costs (they are only paying for work that needs to be done).

Freelance contracts can be more expensive for the business, as the freelancer will have a set hourly or daily rate that they expect to be paid for the work they do. This additional cost can be worthwhile, if the business has a specific or specialist task that can’t be carried out within the business.