There are different types of fixed term contracts, but generally they are identifiable because they all have an end date for employment. Therefore, a fixed-term contract is a contract of employment which terminates on a specific date, on completion of a precise assignment/project or ends after a specific event.
Usually fixed term contracts are used for:
- a fixed-term contract covering a permanent employee’s sabbatical, e.g. maternity or sickness leave;
- a fixed-term contract connected to a funding arrangement which pays the fixed term employee’s salary for said period;
- a seasonal contract to deliver cover for demand, e.g. Christmas or New Years
Fixed-term contracts can consequently offer employers with assurance and flexibility over their staff.
What rights does a fixed-term employee have?
In addition to having the standard rights which permanent employees have, employees working under a fixed-term contract of employment have other exclusive rights provided to them.
For instance, fixed-term employees have security against less favourable treatment in comparison to permanent staff and, subject to continuous service levels, they may have the right to have their employment renewed to permanent rather than fixed-term position. Employees can also, depending on the duration for which they have been employed, have the right to redundancy pay and have protection against unfair dismissal.
What does less favourable treatment mean in relation to fixed term contracts?
Employees under a fixed-term contract have protection against less favourable treatment in the workplace if that treatment is due to their fixed-term status. This means that no employee with a fixed-term contract should be given lesser rights than a comparable permanent employee, unless the employer can warrant that less favourable treatment.
Examples of usual less favourable terms in fixed-term contracts can involve omissions from pension membership or from company bonus payments and discount schemes.
In exercise, the security from less favourable treatment does not mean that employees with a fixed-term contract constantly have to receive equal rights to permanent employees. An employee with a fixed-term contract will only be able to bring a claim for less favourable treatment where that treatment is due to their being on their fixed term status and where the treatment cannot be demonstrably justified.
Permanent status is given to fixed term contract holders after four continuous years
Unless the employer can warrant otherwise, an employee working under a fixed-term contract who has been employed by that same employer continuously on continuous fixed-term contracts for four or more years will be seen as a permanent employee.
It is usually a challenging job for an employer to explain why the employee should not be considered as permanent in such situations. However, instances of cases in which a fixed-term employee has been lawfully refused permanent status include where they have been continuously employed to provide cover for sick employees, or where cover is being delivered to permit a permanent employee to reoccupy their role after a career break.
Does termination of a fixed-term contract amount to dismissal?
A shared misunderstanding about a fixed-term contract is that the termination of the contract at the end of the fixed-term does not amount to a dismissal. This is not the case.
The expiry and non-renewal of a fixed-term contract is regarded in law as a dismissal.
This means that any employee working under a fixed-term contract who has two or more years of continuous service is entitled to bring a claim for unfair dismissal where the contract runs out at the end of the term and is not renewed.
Accordingly, even though the fixed-term contract expressing at the beginning that the contract will terminate on a specific date, an employer should still serve the correct notice to the fixed-term employee and should follow a fair dismissal process.
For more information on fixed-term contracts contact JMR Solicitors.