A typology is suggested that links human resource management practices and theories in strategic management, which are agency theory and transaction cost economics. Four types of employment contracts (day-to-day contract, long-term contract, outcome-based short-term contract, and outcome-based long-term contract) are drawn from the combination of the degree of firm-specificity of skills and the level of agency problems. Also, this study shows these contracts may evolve over time to deal with changed situations regarding employment conditions. A case on a Korean language institute was used to explain this typology helps a firm optimize contracts with its employees. Implications and further research are suggested.