What Is an Open-Ended Employment Contract?

Open-ended contracts are convenient for employees and employers

Open-ended contracts are convenient for employees and employers

Open-ended employment contracts are like moving in with a boyfriend -- there’s an understanding of mutual commitment, but neither party is married to the other and can move out any time with no penalty. Open-ended employment contracts have no definitive time frame, giving an employer flexibility in keeping you on board or letting you go at any time. Although they don’t give you certainty in terms of your work situation, open-ended contracts can be beneficial for both parties.

Contract Duration

Some employment contracts specify begin and end dates. If the company wants to keep the employee at the end of the contract, it must renew the contract. When a business hires an employee for the long-term, it often offers an open-ended employment contract, meaning the terms of the contract continue as long as both parties agree. You and your employer might make changes to your contract, but you won’t need to reapply for your position and re-sign a new contract.

Reasons for These Contracts

If you and your employer negotiate an annual contract, you must renew it each year. This requires more paperwork for both parties. An open-ended contract allows you to keep working year after year with no new contract to negotiate or sign. If you want a raise, more benefits or a change in your hours or title, you negotiate what you want and simply amend the terms of your contract, but not the duration. Some employers, including government agencies, sign date-specific contracts because they are required to review and renew contracts annually and because it’s easier to shed an employee because instead of termination, the employer simply chooses not to renew the contract.

Disadvantages

If you sign an open-ended employment contract, you aren’t guaranteed work for a specific time period, or payment of your salary and benefits for the duration of your contract if you’re terminated early. To strengthen your position in this area, try to negotiate a work contract that requires your employer to give you three- to six-months’ notice and/or a severance package that pays you part or all of your salary and/or your benefits for a specified time frame after your separation from the company. Employers might be more willing to do this is you agree to waive your severance benefits as soon as you find employment.

Similar Contracts

Although they have begin and end dates, other types of employment contracts are similar to an open-ended contract. Renewable contracts are those that give an employer the ability to re-sign you at your current rate at the expiration of the contract. These contracts often last for one to three years. In some cases, they simply renew unless one or both parties requests a change to the contract. Probationary contracts allow companies to see what you can do for them for a 90-day or six-month period before bringing you on for a long-term relationship. These contracts specify that after the probation period, the company can let you go or keep you on at your current contract rate. They might offer you more or less once they see how you perform, and you might wish to change your contract terms once you get a feel for the job.

 

About the Author

Sam Ashe-Edmunds has been writing and lecturing for decades. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such Smart-Healthy-Living.net, SmartyCents and Youthletic. Edmunds has a bachelor's degree in journalism.

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