What Is an Open-Ended Employment Contract?

Normally, employees operate under employment contracts, which ideally are written down. These contracts spell out the terms under which an employee will work and how the employer will compensate him for his efforts. Employers have options about what type of contract they use when they hire someone. Most employers use a standard open-ended employment contract because of the benefits such a contract affords.

An open-ended employment contract is an employment contract that has no termination date for the employee. Under this type of contract, the duration of time an employee will spend under a single employer is ambiguous, leaving the employee free to keep working in her job as long as her performance meets expectations.

Although an open-ended employment contract does not indicate when a boss will cease to employ you, it still can specify dates for operation. For instance, some jobs, such as those at outdoor water parks, are seasonal. In these cases, even though work isn't consistent throughout the year, the employee and employer assume that the employee will return to work at the beginning of the next season.

The major advantage of an open-ended employment contract is that employers do not have to negotiate a new contract repeatedly. Instead, they can use periodic employee evaluations and meetings to make small modifications to the contract that already exists. Employees need not stress about whether the employer is going to let them go on a certain date, and they know the terms of their employment will remain fairly consistent.

With an open-ended employment contract, employers commit to the employees they've hired for an extended period. This sometimes gives employers less of an opportunity to hire new, innovative workers who can give a company the shakeup it may need to remain competitive. If an employer wants to let a worker go, or if a worker wants to leave, the employer and worker have to engage in additional negotiation and documentation. This can be emotionally difficult if the atmosphere in the workplace is negative.