Fixed Term Contracts and Your Business

As the workplace changes and your employees move away from the traditional nine to five, do you know enough about fixed term contacts, how to treat staff on fixed term contacts and how to end fixed term contacts?

What are Fixed Term Contracts?

A fixed term contract is one with an employee or worker that terminates on a specified date or at the end of a particular project or a specific task. Fixed term employees could be employed for seasonal work, be casual employees taken on to cover a busy period or someone covering maternity leave.

Employees are on a fixed-term contract if both of the following apply:

  • they have an employment contract with the organisation they work for
  • their contract ends on a particular date, or on completion of a specific task, eg a project.

Workers don’t count as fixed-term employees if they:

  • have a contract with an agency rather than the company they’re working for
  • are a student or trainee on a work-experience placement
  • are working under a ‘contract of apprenticeship
  • are a member of the armed forces.

Fixed-term employees are:

  • seasonal or casual employees taken on for up to 6 months during a peak period
  • specialist employees for a project
  • covering for maternity leave.

Why do Fixed Term Contracts Matter?

A person’s employment status determines their rights and employer’s responsibilities. You must not treat fixed term workers less favourably than permanent employees doing the same or a similar job. However, you are able to objectively justify less favourable treatment where you have a good business reason for doing so.

If you’re hiring fixed term workers for a long period of time, it’s worth considering that those who work continually for the same employer for two years or more may have the same redundancy rights as a permanent employee. Employees on a fixed term contract for four or more years may automatically become a permanent employee.

Fixed term employees should get:

  • the same pay and conditions as permanent staff
  • the same or equivalent benefits
  • information regarding any permanent vacancies within the organisation
  • protection against unfavourable treatment.

If an fixed contract employee feels they have been treated less favourably they are able to ask for a written statement of reasons for the treatment first. However if the matter remains unresolved they can submit a claim to the Employment Tribunal. This must be made within three months of the date the less favourable treatment occurred.

What Happens When a Fixed Term Contract End?

Contracts will normally end automatically when they reach the agreed end date, and you do not normally need to give notice. If the work ends after two years service the employee may be entitled to a redundancy payment and is entitled to the same redundancy rights as a permanent employee.

If the work ends before the agreed end date, and the contract allows the worker to be dismissed, then you need to give the appropriate notice period. Employers may be in breach of contract if they wish to end the contract and there is no provision to so in the contract of employment.

Any employee on a fixed term contract for four or more years may automatically become a permanent employee, unless the employer has a good business reason not to do so, or a collective agreement removes the right.

If you are struggling with fixed term contracts or other areas of HR policy, contact me today


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