Employment Agreement - Indefinite Term

What is an Employment Contract?

An employment contract is an agreement between an employer and employee that sets out the terms that apply to the employment, including their rights, their duties, their responsibilities and potential liabilities. Even though an agreement which is not in writing is valid, it is usually very difficult to prove verbal agreements. If there are any unclear terms relating to the employment, the burden is on the employer to prove what has been agreed. The employee is seen as the weaker party, and therefore tends to be protected by the Employment Protection Act in Sweden.  The law presumes that the employment is full-time and indefinite unless it can be proven otherwise.

An indefinite employment contract means that the employee will have a permanent contract. It is common that a contract of indefinite employment starts with a probationary period, which can be up to a maximum 6 months. If you use this contract and confirm that you would like a probationary period, there will be several options (up to 6 months) for the probationary period. An indefinite-term employment will follow after the probationary period has ended. If you do not act at the end of the probationary contract, it will automatically be turned into an indefinite–term contract. You are not allowed to use any time-limited employment contracts after a contract with a probationary period. A probationary contract can cease with 2 weeks notice. 

Why is an Employment Contract important and why should you use an Employment Contract?

Having a written employment contract is important because:

1. The employer has complied with their legal obligation to provide details of the employment to the employee.

2. There is no uncertainty or dispute about what terms have been agreed. Without a written employment contract in place, it is far more likely that there will be a dispute between the employer and employee either during the employment or after the employment ends about what the employer and employer agreed i.e. what terms and conditions applied, particularly where verbal discussions have taken place over a period of time. Just because there is no written employment contract doesn’t mean there is no employment contract - employment law means that a contract still exists, it is just not written down. Having a written agreement that clearly explains the parties’ rights, obligations and responsibilities reduces confusion, avoids ambiguity or uncertainty and gives everyone clarity and peace of mind. An employment contract is not seen as a contract between two equal parties in Sweden. The employee is always seen as the weaker party and therefore tends to be protected by the law. This means, if there is any doubt, the court would often rule in favor of the employee. 

3. Unless otherwise agreed, the Employment Protection Act assumes that the employment is permanent and full-time. If the employee is hired on a part time and/or fixed term basis, it is particularly important that you have an employment contract that reflects the role.

4. The employer is adequately protected. For example, the contract contains obligations on the employee to keep information that they obtain during their employment confidential, and it enables the employer to terminate the employment by making a payment in lieu of notice rather than having the employee working their notice period.

5. It encourages good relationships between the employer and employee. It puts a new employee at ease and gives them confidence in their employer. This is especially important in early-stage startups, where there may already be some uncertainty and where the structures and processes seen in larger companies may not be present.

6. Permanent employment often begins with a probationary period, however this must be clearly specified in the employment contract. If you do not state that a probationary period applies, then the employee will be immediately hired on a permanent basis.

The employer and employee should sign the employment contract before the employment begins.

What are the common pitfalls of an Employment Contract?

1. Not having a written employment contract
   Whilst there is no legal requirement for an employee to have a written contract of employment, as explained above, having a written employment contract in place avoids uncertainty and disputes, and protects the employer.
   
   

2. Including the wrong information in the contract
   - Start date: As an employer you are obliged to pay an employee’s salary accrued on a daily basis. You could therefore end up paying more if the start date is incorrect.
   - Work Hours and salary: It is a common mistake to specify, for example, 50% part-time in relation to working hours but then set out 100% salary instead of 50%. The employee can claim that they thought that the full time salary in the contract is applicable to their working hours.
   
   

3. Updating the contract during the employment
   A common misunderstanding is that you need to update an employment contract each time an employee changes work-tasks, roles etc - which is not required. If you would like to add more terms and provisions to an employment contract as a result of an employee being promoted, we would recommend that you do so by way of a new contract, given the substantial change in terms. 
   
   

4. Losing the signed copy
   Without a signed copy of the employment contract, there is no evidence of what the agreed terms and conditions of the employment are. Signed contracts can quickly and easily be saved on the PocketLaw platform so that they are securely stored.
   
   

5. Not having the other documents you need
   As you will be processing your employees’ personal data, in addition to the employment contract, you should also provide employees with a privacy notice in accordance with GDPR.