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02. Employment Contracts

Minimum requirements

The Working Environment Act requires the employment contract to be in writing and must contain, at a minimum, certain elements pertinent to the employment:

  • Identification of the parties to the employment.
  • The place of work.
  • A description of the work or the employee’s title, post or category.
  • Date of commencement.
  • Estimate of the employment duration for temporary contracts.
  • The basis for temporary status must appear from the temporary work contract.
  • Work hours.
  • Trial period (if any).
  • Total number of vacation days and vacation pay rate.
  • Notice periods.
  • The wage and wage payment procedures as well as other supplements and remunerations not included in the pay, if any.
  • The duration and disposition of the agreed daily and weekly hours. In case the work is performed periodically, the employment contract shall stipulate or provide the basis for calculation, when the work is performed.
  • Length of breaks.
  • Arrangements regarding working time.
  • Applicable collective agreement.

Fixed-term/Open-ended Contracts

The main rule is fixed employment. If a person is employed temporarily, certain requirements in the Working Environment Act must be met, for instance that the employee shall work for someone who is temporarily absent or that the nature of the work justifies the use of a fixed term contract. If the requirements are not met, the consequence is that the employee is considered permanently employed. The same rule applies for employees who have a fixed term contract for more than four consecutive years in the same company.

In addition, temporary employment  on a general basis is possible under certain conditions. This means that the worker is temporarily employed without the employer having to justify the need for temporary employment. This type  of temporary engagement may not exceed 12 months. After 12 months, the employment contract may be terminated, or the employee may be employed permanently or in one of the temporary engagements described above. If the employee is not offered a new position, the employer cannot hire a new person temporarily on a general basis to perform the same type of work.

Temporary employment engagements shall not exceed 15% of the total number of employees in the undertaking, of course it is always permissible to enter into such engagement with at least one employee in the company.

 

Trial Period

An employment contract may include a “trial period” for a maximum of  six months. To be valid, the trial period must be regulated in the written employment contract. During the trial period, the threshold for a legal dismissal with a notice period due to circumstances related to the employee is considered to be somewhat lower. The notice period within the trial period cannot be shorter than is 14 days, and runs from day to day. The trial period may be extended if the employee is absent during parts of the trial period, and such absence is not caused by the employer, provided that the employee has been informed of this extension possibility in writing at the time of his appointment. This is normally done by including a clause in the written employment contract. Also, the employee must receive written information about the prolongation prior to the expiration of the trial period.

Notice Period

During the trial period, the notice period is only 14 days. The employment contract may provide for a shorter or a longer notice period. The notice period may also be agreed upon through collective agreements. Notice of termination given during the trial period runs from the date the employee received the notice.

Notice of termination given to the employees hired on a permanent basis must be minimum one month and starts on the first day of the month following the date the employee has received the notice in writing. For employees who have been employed for at least five consecutive years with the same employer  when termination is given, a mutual period of notice of at least two months applies. If an employee has been employed for at least ten consecutive years with the same employer when terminated, the mutual period of notice is at least three months. It is common for employment contracts  to have a mutual notice period of three months.

If an employment contract is terminated after at least ten years of continuous employment with the same employer, the notice period is prolonged to at least four months if it takes place after the employee has reached 50 years of age, at least five months after the age of 55, and at least six months after the age of 60.

Any questions

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