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What is a fixed term contract of employment?

Employment contracts require close attention from both employers and potential employees. This is because it establishes the terms of the working relationship. However, there are also many variations in types of employment contract. Choosing to offer fixed term contracts might be beneficial depending on your business needs. Continue reading to find all the information you need to make the right decision for your business.

How does an employment contract work?

A contract of employment should outline the responsibilities of both an employer and an employee, as well as the rights afforded to each party. It is a legal requirement that an employee can request a written version of their employment contract. Regardless of the form or type of employment contract, it will typically contain the following:

Job title and job description.
Salary and payment information.
Policies and procedures of the company.
Location of work and working hours.
The start date.
Any specific requirements of the job (such as a workplace medical).

Contracts of employment impose rules on both parties which, if neglected, can be grounds for legal action. These are broadly broken down into duties of care, duties of fidelity, and duties of trust and confidence. This can relate to various terms and clauses within an employment contract, which is why it’s always recommended that employers have an expert in contract law review the document before it is sent.

Fixed term contracts of employment explained

As experienced employment law practitioners, we have experience helping businesses draw up all kinds of employment contracts, including fixed term contracts.

Under the Fixed-term Employees Regulations a “fixed-term contract” means a contract of employment that, under its provisions dealing with how it will terminate in the normal course, will terminate on either of the following:

The expiry of a fixed term.
The completion of a particular task.
The occurrence or non-occurrence of any other specific event.

As the name suggests, a fixed term contract sets out the tasks that the individual is being hired to complete, along with the period of time they must be completed in. These contracts are frequently used to cover staff absences, complete specific projects, or compensate for seasonal demand.

The following are examples of fixed-term contracts:

A contract that ends on a specific date.
A contract covering a permanent employee’s sickness or maternity leave which will terminate on the permanent employee returning to work.
A contract linked to a specific funding stream, which is used to pay for the employee’s salary, where the contract will terminate on the expiry of the funding stream.
A contract due to expire on the completion of a particular project.
A short-term seasonal contract designed to provide for additional demand or workload.

Fixed-Term Employees Regulations

In England, Wales and Scotland, the Fixed-term Employees Regulations implemented the Fixed-term Work Directive. In Northern Ireland, the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations (Northern Ireland) 2002 (SI 2002/298) apply. The Directive was designed to prevent the less favourable treatment of fixed-term employees as compared to permanent employees and to prevent abuse arising from the use of successive fixed-term contracts.

The Fixed-term Employees Regulations introduce the concept of parity of treatment between fixed-term employees and comparable permanent employees. Fixed-term employees are entitled not to be treated less favourably than comparable permanent employees by reason of their fixed-term status unless the employer is able to objectively justify the different treatment. The concept is similar to that found in the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (SI 2000/1551)

Successive fixed-term contracts may become a permanent contract

Under regulation 8 of the Fixed-term Employees Regulations, employees who have been continuously employed for four years or more on a series of successive fixed-term contracts are automatically deemed to be permanent employees (that is, employed on an indefinite contract) unless the continued use of a fixed-term contract can be objectively justified. Only service after 10 July 2002 counts for these purposes (regulation 8(4), Fixed-term Employees Regulations).

This includes cases where the original contract has been renewed or extended (“renewal” includes extension; regulation 1(2)), or where a different contract has been entered into after the expiry of the original contract (regulation 8(1)). It does not include cases where there has only been one fixed-term contract (of whatever duration) that has not been renewed or extended.

Tips for creating a fixed term contract

Securing the benefits associated with fixed contracts is only possible if they are drawn up correctly. Oftentimes, this requires input from an expert in employment law as the contract must be legally airtight whilst also working for your industry. To help employers create effective fixed term contracts, we’ve put together this checklist.

Define the responsibilities of a fixed term employee.
Choose a start and end date ahead of time.
Make sure you comply with statutory rights.
Establish how you will end the contract (non-renewal).

Bespoke employment law advice for employers

We provide services that enable effective employment law outsourcing for companies. Just as fixed term contracts can be a flexible way for employers to access specialist talent, so too can outsourcing employment law support. At Employment Law Services Ltd (ELS), our team are experienced in all manner of employment contract law, which allows us to help businesses in a range of sectors. Contact us for more information.