Employment contracts

A clear, unambiguous and updated employment contract can save both you and your employer from misunderstandings and unnecessary conflicts. 

The more comprehensive your employment contract and your working conditions, the less scope your employer has to change your position and working conditions. This often becomes evident in connection with reorganisations and business transfers.

What is an employment contract?

An employment contract is a mutual agreement between the employer and the employee regulating the employment relationship between them.

Along with laws and any collective pay agreements that may apply, the employment contract imposes important limitations on what is known as the employer's managerial prerogative. In other words:

• The more specific and detailed an employment contract is, the less scope the employer has to change an employee's working conditions.
• Unlike administrative provisions regarding rights and obligations, your employer may not unilaterally change your rights under the employment contract.

The law: you are entitled to an employment contract

The Working Environment Act, section 14-5 stipulates that all employment relationships must be subject to a written contract of employment.

• In employment relationships with a total duration of more than one month, a written contract of employment must be entered into as early as possible and one month following commencement of the employment relationship at the latest.
• In employment relationships lasting less than one month or in connection with hiring out of labour, a written contract of employment must be entered into immediately.

The employer must draft a written contract of employment in accordance with section 14-6. This provision specifies the minimum requirements for what an employment contract should contain. Note, however, that all aspects of major significance for the employment relationship must be included in the employment contract, regardless of whether or not such aspects fall outside the minimum requirements mentioned in the abovementioned provisions.

The employment contract should be signed by both parties before you start your new job. It should also be signed before you resign your current job to avoid unnecessary surprises after you hand in your resignation.

An employment contract will be valid even if it has not been entered into in writing. However, in cases like this, establishing what was agreed and even whether an employment contract was actually entered into will become a matter of proof.

At a minimum, an employment contract must contain the following items:

The Working Environment Act, section 14-6 first paragraph states that the employment contract must contain information of major significance for the employment relationship:

The information mentioned in the first paragraph, (g) to (k) may be given in the form of references to laws, regulations and/or collective pay agreements regulating these matters.
Working Environment Act, section 14-6, second paragraph

Changes in the employment relationship

Changes in the employment relationship as referred to in sections 14-6 and 14-7 of the Working Environment Act must be reflected in the employment contract as soon as possible and no later than one month after they come into effect. This generally does not apply if changes in the employment relationship are due to amendments to acts, regulations or collective pay agreements.

NB: Pay during sickness and leave of absence

In the event of sickness or statutory leave, an employee who is entitled to sickness benefit or other benefits from the National Insurance scheme will only be entitled for coverage up to 6G unless alternative agreement has been explicitly specified in either a collective pay agreement or an individual agreement such as an employment contract.

This means if your pay is higher that 6G – and if your employer does not cover the loss of income exceeding 6G – you will receive less pay during sickness and/or statutory leave.