Monday, 25th May 2020
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Temporary employment contract VS Indefinite Contract

Temporary employment contract VS Indefinite Contract

The difference between temporary and permanent employment contracts

Temporary Contract
It is when both parties agree a termination date. It can be part-time or full-time.

The reasons for for temporary work can be:

  • The worker is needed until the end of a project or job. Termination is dictated by the completion of the job.
  • A seasonal increase of work or an exceptional temporary increase.
  • Temporary replacement of a worker on sick or maternity leave, or other The reason has to be specified in the contract. Unjustified use of temporary contracts converts the contract to indefinite.

After 2 years temporary contracts become permanent (or 24 months of work in a period of 30 months).

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

Contracts must state the number of hours daily, weekly, monthly or yearly and their distribution in a time-table. Unless specified the contract will be interpreted to be full time.

Any type of contract can be converted to an indefinite contract by written agreement or ‘de facto’.

The indefinite contract is ideal for providing a sense of stability and workers’ security that will contribute to company loyalty and a greater responsibility. There are some incentives for companies to enter into indefinite contracts. Such contracts are favoured with a reduction in the social security cost and, in some cases, with tax deductions. 

Despite this, employers are often reluctant to enter into an indefinite contract even if at first they do not have ‘temporary vacancies’ Perhaps because:

  • Uncertainty in the financial ability to support the worker over a long time.
  • Fear of costly redundancies.



Some considerations - Pros & Cons
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
cutting costs or just because you decide so.

Of course, the worker is entitled to be given fair notice (though this is not mandatory in every case) and to a fair compensation, redundancy payment. This is true for temporary contracts too. The giving notice depends on the length of time he has worked. Indefinite contracts with a one-year trial period do not require notice during the trial.

The cost of redundancy payments in terms of daily wage per year, depending on the reason for the dismissal, is:

  • End of Contract (properly notified): 9 day of salary per year worked.
  • Dismissal for Objective Reasons: 20 days.
  • Dismissal for Subjective Reasons: 33 days.
  • Voluntarily worker’s termination: 0 days.

Obviously 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.

A cheaper option is to stick to a temporary contract followed by another relying on a termination date with a redundancy of 9 days per year. However this is illegal, as soon as the worker brings it up to light the
company will have to pay the balance, plus assuming the risk of being fined.

To remove any undue fears, consider that the company needs not to pay ‘finiquito’ in dismissing a during the trial period which can be up to 1 year in some types of indefinite contracts, as mentioned above. 

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