Fixed-term contracts are a necessity for some businesses but many do not fully realise what they are and what use they have to their business.
So, we asked our Advice Service some of their most frequently asked questions in order to help explain a little more about fixed-term contracts.
What is a fixed-term contract?
A fixed-term contract of employment is defined as a contract of employment which:
- has a definite start and end date;
- terminates automatically when a particular task is completed; or
- terminates after a specific event (other than retirement or summary dismissal).
Is a contract prevented from being a fixed-term contract by the inclusion of a clause entitling one or both parties to terminate it early by giving notice? No.
If in the normal course of events it will continue until the date specified, a contract for a fixed period that can be terminated earlier by notice is still a fixed-term contract for the purposes of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations.
What types of individual are not regarded as fixed-term employees for the purposes of the Regulations?
- those who have a contract of employment or other contractual relationship with an agency rather than the company they are working for (i.e. agency workers);
- members of the armed forces; and
- apprentices, students or other trainees on a certain work-experience placement or temporary work schemes.
What are the advantages of fixed-term contracts for the employer and when is it appropriate to use them?
There may be times when it is best for your business to take on somebody on a fixed-term contract. Fixed-term contracts give you the advantage of bringing in specific skills and labour as and when they are needed. For example:
- to cover staff absence as appropriate (e.g. maternity and adoption leave, long-term sickness, sabbatical leave or secondment);
- seasonal work;
- where there is no reasonably foreseeable prospect of short-term funding being renewed nor other external or internal funding being available or becoming available;
- the post requires specialist expertise or recent experience not already available within the organisation but only for a short time; or
- where demand for the work can clearly be demonstrated as particularly uncertain.
Are employees on fixed-term contracts entitled to statutory minimum notice of termination?
Employees on fixed-term contracts which have a stated termination date (e.g. your period of employment will be from 1st September 2009 to 31st August 2010) do not have to be given specific separate notice that their contract will come to an end at the stated date.
This is because they are already regarded as having been notified of the date that the employment is expected to end.
However, if the employer wishes to bring a fixed-term contract to an end earlier than the notified termination date, then notice must, of course, be given.
The same principles apply to fixed-term contracts which terminate automatically on completion of a particular task.
What employment rights do fixed-term employees have?
Fixed-term employees also have access to the same employment rights, such as the ability to claim unfair dismissal and statutory redundancy pay, as their permanent equivalents.
Fixed-term employees also have the right to be treated no less favourably than comparable permanent employees unless the difference in treatment can be objectively justified.
This applies to terms and conditions of employment, qualifying periods of service for benefits, access to vacancies and training opportunities.
In addition, any employee who has been on a fixed-term contract for four or more years will usually be classed in law as a permanent employee if their contract is renewed. Or, if they are re-engaged on a new fixed-term contract.
The only exemptions to this are when employment on a further fixed-term contract is objectively justified, or the period of four years has been lengthened under a collective or workplace agreement.
Who would be a comparable permanent employee?
A comparable permanent employee means someone who is working for you in the same place, doing the same or similar work.
Skills and qualifications are taken into account where relevant to the job. W
here a fixed-term employee does the same work as several permanent employees whose contractual terms are different, the fixed-term employee can choose who to compare themselves to.
If no comparable permanent employee works in the same place, a fixed-term employee can choose someone working for you at another premises, but not someone working for a different employer (not even an associated employer).
What happens if a fixed-term contract is not renewed at the end of the fixed term?
This is classed as a dismissal in law. If the employee has at least one year’s continuous service he will have the same right to claim unfair dismissal as any other employee.
Consequently, you should ensure you have a fair reason for the dismissal and that a fair procedure is followed and that you act reasonably. However, since the repeal of the statutory dispute resolution procedures, employers in Great Britain are no longer obliged to adhere to the three step standard dismissal procedure when a fixed-term contract expires.
Can we always select fixed-term employees first for redundancy?
Fixed-term employees should not be selected for redundancy simply because of their fixed-term status.
However, where fixed-term employees have been brought in to complete a particular task or as cover over a peak period, you may objectively justify selecting them for redundancy at the end of their contracts.
Where the length of service is a criterion for redundancy selection, it should apply to both fixed-term and permanent employees unless there is objective justification.
We offer redundancy advice to aid with these issues.
We took on 25 employees on fixed-term contracts for six months to cover a peak in demand. These contracts are all coming to an end shortly. Is there anything we need to be aware of?
Yes. Strictly speaking, the collective redundancy consultation requirements will apply. Failure to comply with those requirements may entitle the employees to a protective award of up to 90 days’ pay.
Our Advice Service is available 24 hours a day, 365 days a year to help guide your business, though the implementation of fixed-term working in your business. Call the Advice Service on 0844 892 2772 and one of our trained Advisors will be happy to help.