Fixed-Term Contracts

Fixed-term and temporary contracts are frequently used as a means of meeting short term staffing needs and increasing flexibility within the workforce.

However, careful consideration needs to be given to the way in which such contracts are set up, managed and ended.

In this article, we answer some key questions that we have been asked relating to temporary and fixed-term contracts.

When should a fixed-term contract be used and when might a temporary contract be appropriate?

Contracts should be permanent unless there is an objective business reason for not doing so.  Fixed-term and temporary contracts should be used for specific purposes related to the operational needs and not for reasons related to the individual.

Fixed-term contracts should be used for a specific task or purpose and for a set duration where the end date is known at the outset.

Temporary contracts should be used for an event or activity where the precise end date or duration is unknown.  Employees should be given an indication of when the contract is likely to end.

A temporary contract may be used to cover maternity or sick leave and would expire when either the substantive post holder returns to work or resigns.

In formulating a temporary or fixed-term contract, care should be taken in describing the reason, since a contract can only be ended for the reason it was set up.  Contracts which are loosely or vaguely worded may be more difficult to end without challenge.

What rights do employees on fixed-term or temporary contracts accrue?

An employee engaged in a fixed-term or temporary contract has the right not to be treated less favourably than a comparable permanent employee.

Other service entitlements, such as sick and annual leave, accrue with the length of service.

Employees with more than 2 years continuous service at the date their contract ends – may be entitled to a redundancy payment should the termination arise by reason of redundancy.  Please contact your HR team for more guidance should this situation arise.

How long may a temporary or fixed-term contract continue?

A fixed-term contract should end at the date specified at the outset. A temporary contract should end only for the reason stated at the outset.

It is important that temporary and fixed-term contracts are kept under review, particularly where circumstances change within the organisation.  Where a contract is for a specific duration, any extensions should be done in a timely manner.

It may be harder to successfully justify ending a long-running temporary or fixed-term contract as it could be argued that there is little to distinguish this post from a comparable permanent role.  After 4 years, a fixed-term or temporary contract may be regarded as permanent unless there is a good business reason not to do so. Again, your HR team can provide you with guidance in managing such situations.

How should these contracts be ceased?

Where a fixed-term contract runs its full duration and ends through normal expiry – there is no requirement to give notice.

When ending a temporary contract, it is advisable to meet with the employee to discuss the termination of their employment, confirm the outcome and any notice due in writing and give the employee the opportunity to appeal the termination.  Notice periods should be as stated in the employee’s contract.

Should it be necessary to end a fixed-term or temporary contract early, please contact your HR team for further guidance.

Employees on temporary and fixed-term contracts should be made aware of any permanent vacancies which may become available within the organisation.

Your HR team can provide guidance on all aspects of the management of fixed-term and temporary contracts. Please get in touch for more assistance.