The ultimate guide to hiring contract employees

Hiring contract employees is a great way to get the help you need without having to make a long-term commitment. If you're thinking about hiring contractors to tide you through a busy period or provide a specific expertise for an ad-hoc project, here is your guide to help you hire effectively. Let's get started!

What is the difference between a permanent employee and a contract employee?

A permanent employee refers to a worker who is hired under an employment contract that does not have a predetermined end date, are entitled to the full range of statutory employment rights, and the contract will be ongoing until terminated by either the employer or employee.

On the other hand, contract employees are required to work for a specific amount of time, which has been set and agreed in advance. Do note that in Singapore, contract employees are protected and have the same benefit entitlements as permanent employees, as long as their contract is at least 3 months and above. We will be sharing more about the benefit entitlements for contract employees in Singapore below.

When to consider hiring a contract employee

There might come a time in your business when you need to start thinking about hiring contract employees. Here are some situations where it might be a good idea to consider going this route:

  • You need someone with a very specific skill set for a specific ad-hoc project that you don’t currently have on staff
  • You need an extra pair of hands during a busy season
  • You need someone who can cover a permanent employee’s maternity leave or sabbatical
  • You’re not sure if you want to make a permanent hire yet

What to include in the agreement for a contract employee?

When creating an agreement for a contract employee, be sure to include:

  • The contract employee's name and contact information
  • The dates of the contract period
  • A description of the work to be performed
  • The compensation amount and payment schedule
  • Any expenses that will be reimbursed
  • Any benefits that are being provided
  • Notice period 

Be sure to have both the contract employee and a representative of your company sign the agreement. This will help ensure that both parties are clear on the terms of the contract and can avoid any misunderstandings later on.

Are contract employees entitled to leave benefits in Singapore?

As per the MOM’s website, the Employment Act covers contract employees as long as their employment is at least 3 months long. Some of the commonly asked questions regarding leave benefits include:

  1. Leave entitlement for contract employees
  • Contract employees are entitled to paid annual leave as long as the contract is at least 3 months long and is prorated based on the number of completed months of employment.
  • Do note that the minimum days of leave for 1st year of service is 7 and increases by 1 day for every additional year of service.
  1. Sick leave for contract employees
  2. Do contract employees get maternity leave?
    • Contract employees are entitled to 16 weeks of maternity leave if:
      1. She has worked for the employer for at least 3 continuous months before the birth of the child
      2. The child is a Singapore citizen

Do note that if the contract is renewed within a month, it will be considered as one continuous contract. This is to prevent employers from breaking up the contracts to avoid providing the above benefits for the contract employee.

How to renew the employment contract for contract employees?

There are a few things you should do if there is a contract employee that you’d like to renew. First, check the contract to see if there are any provisions for renewal. If so, follow those provisions. If not, you'll need to negotiate a new contract with the employee. Here are some tips for doing so:

  • Talk to the employee about their goals and objectives for the next contract period. What do they want to achieve?
  • Discuss your company's needs and objectives for the next contract period. What do you need from them?
  • Negotiate a fair salary for the next contract period. This should be based on market rates and the employee's experience and skills.
  • Come to an agreement on the contract length
  • Make sure you include provisions for renewal in the new contract. This will make it easier to renew the contract in the future.

How to convert a great contract employee to a permanent employee?

Converting a high potential contract employee to a permanent employee can be a great way to fill a critical role within your company. Here are some steps you can take:

  1. Identify star performers among the contract employees

First, you'll need to identify the contract employees who you would like to convert to permanent employees. This can be done by reviewing the contract employees' performance over time and determining which individuals are meeting or exceeding expectations.

  1. Discuss the possibility of a contract conversion

Once you've identified the contract employees who you would like to convert, the next step is to meet with each individual to discuss the possibility of a contract conversion. During these meetings, you'll need to explain the benefits of becoming  a permanent employee and address any concerns the contract employees may have about the conversion process.

  1. Begin the contract conversion process if contract employee is keen to become a permanent employee

If the contract employees you've met are interested in converting to permanent employees, the next step is to begin the contract conversion process. This process typically includes completing a formal application and interview process. Once these steps have been completed, the contract employees will be officially converted to permanent employees!

By taking the time to identify and meet with contract employees who are interested in converting, you can ensure that your company has the staffing it needs to succeed. Good luck!

Try out Payboy HR software to manage your payroll and more!

Now that you have onboarded your contract employees, it can be overwhelming to manage different types of employees with their unique payroll requirements. Here are some benefits of using Payboy to manage your payroll:

  1. 100% Compliant and 100% peace of mind
    • Prepare your e-submission of CPF contributions with a few simple clicks on Payboy! 
  2. Covers any work arrangement
    • Working with full timers, part timers, freelancers and contract staff? We’ll take care of the unique payroll requirements for each working arrangement.
  3. Transparent, Accurate and Simple
    • Full visibility on how payroll is calculated automatically based on shifts, attendance, leave and submitted claims, within an intuitive experience.
  4. Fully integrated with your preferred platforms
    • We’ll fit into your ecosystem seamlessly and keep your finance team happy. Check out our full list of integrations.

Make local and global payments with PayBeyond

Found the right contract employee in Malaysia or Vietnam to support your business needs but not sure how to send overseas payment? With PayBeyond powered by Rapyd, you can now make local and global payments with really low transaction fees and high security. You can now grow internationally and remotely without worrying about payment. Sign up for a demo below and see how we can help your business!

Find out how you can do it all with Payboy

Reach out to us if you are keen for a free demo on how we can help you save hours and give you some peace of mind on payroll and other HR matters so that you can focus on your business and people.
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