Regular Employees and Contract Employees: Pros/Cons and Precautions

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When looking for a job, we often see the term “contract employee”, but how does this differ from a regular employee? Contract employees are “non-regular employees,” in the same way as part-time or temporary employees. Note that the classification is different from that of regular employees. In this article, we look at the differences between regular employees and contract employees, and introduce the points to be aware of when working as a contract employee.

Differences between regular employees and contract employees

The employment term is different for regular employees and contract employees. Regular employees have no fixed term of employment. This is an “indefinite employment” and includes the assumption that the employee will work full-time until retirement. On the other hand, contract employees, are “fixed-term employees” with a predetermined contract period. A typical contract period is 1-3 years. When the end of the contract period approaches, a decision is made whether or not to renew the contract.

Contract employees also have holidays, paid leave, and social insurance. Some companies pay a bonus. However, it is safe to assume that the employment of contract employees is less stable than that of regular employees, not only in terms of employment period but also in terms of income.

There are some companies where it is difficult to enter as a regular employee, but relatively easy to enter as a contract employee. A path that some take is to join the company as a contract employee and aim to become a regular employee after their abilities in the job are recognized.

Advantages and disadvantages of regular employees and contract employees

Regular employees can expect long-term employment and stable income. On the other hand, however, they do not have the freedom to choose the way in which they work. Contrary to this, contract employees can, to a certain extent, work according to their personal schedule. However, it is stipulated in the Japanese Labor Standards Act stipulates that the term of a fixed-term employment contract for contract employees is limited to three years in principle. Therefore, at least every 3 years, you have to be concerned about losing your job. You should consider the various advantages and disadvantages of regular employees and contract employees before choosing how you want to work.

Advantages of regular employees

• In principle, they are employed until retirement
• There are salary increases/promotion
• Higher bonus than for contract employees, and retirement benefit is paid in many cases

Disadvantages of regular employees

• Hard to take leave for long periods
• There is the possibility of transfer
• Basically full-time work

Advantages of contract employees

• Easier to enter the company than for regular employees
• Little possibility of transfer
• Easy to discuss number of working days and hours

Advantages of contract employees

• Risk that contract term will not be renewed even if employee desires it to be
• Unable to quit job during the contract term
• Lower bonus than for regular employees. Retirement benefit not paid in many cases.

Points to note when working as a contract employee

The term “contract employee” does not exist in Japanese law. Contract employees are “non-regular employees” like part-time workers and dispatch workers. When working as a contract employee, check the “employment term, possibility of contract renewal and conditions” and “promotion to regular employee” on the work conditions notification document very carefully.

Employment period, possibility of contract renewal and conditions

Check the “Employment term”, “possibility of renewal after contract has matured”, and “conditions for renewal”. If these three items are written in an ambiguous way or not written at all, it is important to check with the company and have these stipulated in writing.

Promotion to regular employee

Sometimes, when recruiting contract employees, “promotion to regular employee status” will be stipulated. This refers to changing one’s status from contract employee to regular employee.

If you want to make the step up to regular employee, it is best to confirm the company’s record of promoting employees to regular employee status and the actual conditions. There may be some companies who use this when recruiting as a means of attracting applicants, despite the fact that they have no track record of promotion to regular employee status. You should take care in this regard.

Summary

The biggest difference between regular employees and contract employees is the term of employment. The content of the agreement and conditions differ depending on the company, but for people who want to build a long career at one company, it is probably best to work as a regular employee. On the other hand, those who for personal reasons are restricted to “working 3 days per week” or working from “9:00 to 16:00”, may be more suited to contract employee, where they can choose the style of working more easily. Please choose the style of working that suits you best.