As an entrepreneur, there are several requirements and processes to consider while setting up a company. Technology and globalization have caused a great effect not only on new market trends but also on the labor force. As your company grows, hiring a team that shares your corporative vision will be necessary.
Regardless of the industry, when incorporating personnel into your company payroll you must be aware of the types of contracts that can be used for this purpose, in accordance with local labor law. You need to know the benefits of your hired collaborators and the economic impact that hiring such a person will have on your company.
What is an employment contract?
An employment contract is an agreement between the employer and the employee. This agreement indicates that the employee will provide certain services in exchange for economic retribution, and it establishes the rights and obligations that both parties must respect.
A contract not only provides employment stability for the employee but also allows the company to benefit from the capabilities, knowledge, and skills of the employees under its direction. In addition, it is very useful to protect the disclosure of confidential information of the company as well as any other risk that may arise.
Specifications of an employment contract
An employment contract must consider the following points:
The detail of the functions that correspond to the job, in addition to specifying exactly the position’s name.
Indicate the working hours to be fulfilled by the employee, indicating days and working hours.
Establish the test time to be considered by the employer in order to verify that the employee meets the qualities and capabilities for the position, before proceeding to hire the employee definitively. The law establishes a period of three months of test up to a maximum of six months.
Specify precisely the remuneration that the employee will receive, in addition to specifying any bonuses, if any.
Specify if the contract is for a fixed term or for an indefinite period.
Specify the vacation time the employee is allowed to take and how it will be established, for the employee’s prior knowledge.
Specify clearly, which are the infractions that can end the work contract, so that the employee knows which behaviors to avoid.
Specify the obligations and rights that both the worker and the company must comply with.
Indicate the procedure for the resolution of conflicts that may arise between the company and the worker, which may be by conciliation, arbitration, or some intermediary entity.
Types of contracts
In Peru, the following types of contracts are presented:
1) Indefinite term contract: It is found in our legislation; this contract has a start date, but does not have a determined end date. Therefore, this contract will remain in effect until the employee takes some action that justifies his/her dismissal and is established by law, which will mean the end of the labor relationship.
2) Fixed-term contract: It is also known as an employment contract subject to a system. Although the contracts established by law have an indefinite term, this contract can be applied under certain situations and conditions. Here we can consider the following:
2.1. Contracts of a temporary nature:
Contracts for initiation or increase of activity
Contract for market needs
2.2. Contracts for business restructuring: This is performed by substitution, extension, or modification of the activities developed in the company.
2.3. Contracts of an accidental nature:
2.4. Contracts for work or service:
Contract for specific work or service (duration as necessary)
Intermittent contract (Only to cover the needs of the company’s activities that are permanent but discontinuous)
Seasonal contract (Only to attend to needs at certain times of the year)
It is important to consider that contracts may vary depending on your industry, as special contracts may have to be created, as per local labor law.
Get Assistance from Easyco Experts
Contracts are an essential part of any growing business. Understanding how they work and what applies to your business and industry is a must. When considering employee contracts Easyco can help, our team has vast experience in labor law and other expert areas, helping new business in Peru.
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