In the Republic of Croatia, labor relations, which are the fundamental institution of labor law, are primarily governed by the Labor Law. This law prescribes the procedures for establishing, maintaining and terminating an employment relationship. Labor law is the basis for regulating employment relationships, but it is also supplemented by additional laws, such as the Law on Civil Servants, as well as international treaties and directives of the European Union that additionally define the issue of establishing employment relationships. The precise interpretation of employment contracts is extremely important, especially because in practice work contracts are often concluded instead of employment contracts, which can lead to disagreements and legal ambiguities. In the light of the development of the labor market, stimulated by globalization and liberalization, there is a noticeable increase in agency employment, which establishes a three-way relationship between the worker, the agency and the client. In the final paper, different types of contracts are analyzed, with special emphasis on the advantages and disadvantages related to each form of employment. Furthermore, recommendations aimed at improving the understanding and application of contracts in modern conditions are offered