Fixed-term contracts: five points for employers

Engaging employees under fixed-term contracts can provide employers with workforce flexibility. Fixed-term employees have an array of rights, in particular under the Fixed-term Employees Regulations. We look at five points that employers should watch out for.

1. When is an employee on a fixed-term contract?

Employees are engaged on a fixed-term contract subject to the Fixed-term Employees Regulations where the contract will end automatically in three situations.

The first situation is where the contract ends after a specified period, for example the end of 12 months’ cover for maternity leave.

The second is automatic termination on completion of a task, such as the employee finishing a project.

The third is where the contract ends when a particular event occurs and this could be, for example, the non-renewal of external funding for a post.

• How is a fixed-term employee defined?
• If a contract can be terminated by notice can it be a fixed-term contract?

2. Less favourable treatment across contracts

An employee may be able to bring, without being time barred, a claim for less favourable treatment contrary to the Fixed-term Employees Regulations in respect of earlier fixed-term contracts as well as the last. The claim will be possible if the employer’s actions amount to “a series of similar acts” that continue across the individual fixed-term contracts, even where they are separated by periods of time.

• Can an employer treat fixed-term employees less favourably than it treats permanent employees?
• What happens if an employer treats a fixed-term employee less favourably than a comparable full-time employee?
• In ensuring no less favourable treatment between fixed-term and comparable permanent employees can an employer balance a less favourable condition against a more favourable one?
• Can an employer set a shorter notice period for its fixed-term employees than for its permanent employees?

3. Exclusions from scope of Regulations

In addition to the exclusion of workers who are not employees, the Fixed-term Employees Regulations do not apply to agency workers, apprentices and work experience placements.

• Fixed-term contracts: distinguishing between an “employee” and a “worker”
• What is the difference between a worker who is an employee and one who is not?
• What is the status of workers engaged on casual or zero hours contracts?
• When does a casual worker become an employee?

4. Permanent status

An employee who has been continuously employed on successive fixed-term contracts for four years or more, will automatically become a permanent employee, unless the employer can justify the renewals. The courts have indicated that is difficult for the employer to justify renewal where it has a permanent need for the employee. Acceptable justifications have included the use of successive fixed-term contracts to provide cover for absent employees and also to enable individuals to resume their professional career at the end of the contracts.

• Fixed-term contracts: fixed-term employees and acquisition of permanent status
• Can an employee be employed indefinitely on fixed-term contracts?
• At what point does an employee who has been employed on a series of successive fixed-term contracts become a permanent employee?

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5. Termination

The expiry of a fixed-term contract without renewal is deemed to be a dismissal, even though the employer and employee agree at the outset when the contract will automatically terminate. This rule means that an employee with at least two years’ service can claim unfair dismissal, so the employer must ensure that the dismissal is fair. The employee may also be entitled to statutory redundancy pay.

• How to deal with a fixed-term contract that comes to an end