Fixed-term contracts coming to an end: four things to think about

Even though employer and employee have agreed in advance that an employment contract will come to an end, the expiry of a fixed-term contract is regarded as a dismissal in UK law.

Fixed-term contracts come to an end either on a specified date, at the end of a specified job or project, or in relation to a specific event, such as another employee returning from maternity leave.

Jeya Thiruchelvam, senior employment law editor at XpertHR, said: "It is sometimes mistakenly assumed that nothing, or very little, needs doing when a fixed-term contract comes to an end. However, employers must remember that in the eyes of the law the expiry of a fixed-term contract constitutes a dismissal and, as such, employers must take steps to protect their organisations against unfair dismissal claims and ensure that any such dismissal is fair."

Here, we provide four tips for HR professionals to consider when dealing with termination:

1. The reason for not renewing the fixed-term contract

The first question for the employer is, why it is not renewing the fixed-term employee’s contract? If the work that the employee was engaged to do has been completed or the funding for the role has come to an end, the reason for the dismissal is likely to be redundancy.

2. Fair dismissal for the fixed-term employee

An employee who has worked for two years or more will have gained the right to bring a complaint of unfair dismissal to an employment tribunal, so appropriate steps must be taken to ensure that the dismissal is fair. Generally, dismissal on the expiry of a fixed-term contract will be fair provided that: the contract was set up for a genuine purpose, the purpose of the contract and the reason for its being for a fixed term were known to the employee; and the underlying purpose of the contract had ceased to be applicable when the employee was dismissed.

3. Redundancy pay for the fixed-term employee

In some circumstances, the employer will have to pay the employee statutory redundancy pay if dismissal is by reason of redundancy and the person has accrued two or more years’ continuous service, whether on one or more fixed-term contracts.

4. Successive fixed-term contracts

Where an employee has been continuously employed on successive fixed-term contracts for four years or more, he or she will automatically achieve permanent status, unless the employer can justify the continued use of a fixed-term contract.

The list above is derived from content in the XpertHR task Deal with a fixed-term contract that is coming to an end, which also includes practical guidance on the subject, frequently asked questions and model letters informing an employee of the expiry of a fixed-term contract.

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