Fixed-Term Contract

16 April 2019

A fixed-term contract is usually the best option in a situation where you need cover for a specific period—or you need to complete a specific project.

The primary piece of fixed-term contract legislation is the Protection of Employees (Fixed-Term Work) Act 2003 (the Act).

The main purpose of the Act is to ensure you don’t treat fixed-term employees less favourably than full-time employees. 

What is a fixed-term contract?

It’s a contractual relationship between you and an employee that only lasts for a certain amount of time.

What, then, is the difference between temporary and fixed-term contracts? The terms are in use interchangeably. The latter is in use to govern a temporary relationship between an employer and employee.

A fixed-term contract is the employment contract you use when you need to hire an employee for either:

  • A specific period of time, or fixed-term.
  • To complete a specific project or purpose.

When dealing with a fixed term contract, Ireland’s employment law can cause headaches for employers who aren’t aware of some complications that can arise.

Automatic expiry

One of the main upsides of entering into this type of contract is it’ll expire automatically once the contract reaches the specified end date.

Likewise, a contract with a specific purpose automatically terminates once you achieve that goal.

It’s important to clearly state in the fixed term contract that the contract automatically terminates on the specified termination date or the conclusion of the specific purpose.

If you don’t specify a fixed-term contract termination clause in the contract, you risk having to make it permanent.

Trial periods

One area where you may fall foul of the law is attempting to use a fixed-term contract probation period.

Don’t use it as a trial period to test an employee’s ability to do the job. Use probationary periods and regular performance reviews to determine an employee’s suitability for a position.

A fixed-term contract is only appropriate if the position is for a fixed-term or a fixed purpose set out clearly in the contract.

Non-renewal of a fixed-term contract

One of the benefits of fixed-term contracts for employees is the requirement for you to have objective justification for the non-renewal of a fixed-term contract or not making the employee permanent.   

And if you do intend to renew a the contract without making the employee permanent, you must provide them with a written fixed-term contract notice setting out the objective grounds justifying a second period.

Making a fixed-term employee redundant

The likelihood of having to make a fixed-term contract redundancy should be relatively slim.

If an employee working on a series of these has worked for a continuous period of 104 weeks, they can claim a statutory redundancy payment when the contract ends.

Multiple renewals of a fixed-term contract

You can’t employ workers on a series of these indefinitely.

If you employ someone on two or more continuous fixed-term contracts, the total duration of those contracts must not be more than four years.

After 4 years of employment, if you would like the employee to continue to hold the position, you must offer the employee a permanent position.

There’ an exception where objective grounds exist that justify the ongoing renewal of a fixed-term contract.

If you can demonstrate that the renewal is appropriate and necessary to achieve a legitimate objective, you can continue to use it.

Unfair dismissals and fixed-term contracts

It’s possible to contract out of the Unfair Dismissals Acts 1977-2015 under current legislation.

Permanent employees with 52 weeks of continuous service gain rights under the unfair dismissals legislation. This protection won’t apply to employees working under fixed-term contract even if the employee has continuous service of more than one year. 

For this exception to apply, the fixed-term contract must:

  1. Be in writing.
  2. Be signed by the employer and employee.
  3. State that the unfair dismissals acts shall not apply to a termination arising from the expiry of the fixed-term.

If a court suspects a fixed-term contract isn’t genuinely needed for a specific or temporary purpose, they’ll likely strike it down. Then the employee can claim a permanent contract.

Dealing with a breach of contract

If you believe there’s a breach of fixed-term employment contract, you should review the terms of the contract to see what the consequences of such a breach are.

It’s important to note that non-renewal of fixed-term or specific-purpose contracts on the grounds of poor performance or discipline does not allow an employer to terminate the agreement on the ‘objective grounds’ requirements.

If you have concerns relating to an employee’s performance, or other disciplinary issues, these will not qualify as objective grounds for not renewing a contract.

You must deal with these matters through the normal performance management and disciplinary procedures.

Can an employee terminate a fixed-term contract?

The short answer is yes. The contract should specify notice periods that’ll allow either side to terminate the contract. This is as long as you provide reasonable notice.

If the contract is silent on notice, the minimum notice periods under the Minimum Notice and Terms of Employment Act 1973 will apply.

Need support and advice on fixed-term contracts? Peninsula's here to help 

While fixed-term contracts can be useful, it's important to ensure your business remains compliant with the most up-to-date employment laws regarding employment contracts.

Our HR and employment law experts can support you and your business with fixed-term contracts in Ireland. Call us today on 1800 719 216.

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