How to Use Fixed-Term Contracts

Fixed Term Employment Contract

What is a Fixed-Term Contract?

A Fixed Term Contract:

  • generally lasts from 6 to 24 months
  • is agreed in advance by the employer and employee
  • is for work requiring regular, committed full or part-time weekly hours
  • ends when the specific need, task or project is complete

If work is still needed at the end of the agreed term, the contract can be extended.

When do I use a Fixed-Term Contract?

Fixed-term contracts can be used:

  • to provide extra resource during particularly busy periods
  • to deliver a specific task or project
  • to cover long-term absence such as maternity leave, long-term sickness or secondments
  • when a role has a defined period of funding
  • to deliver specific services where client needs change regularly

What Rights Do Employees On Fixed Term Contracts Have?

Fixed-term employees must receive the same treatment and terms as permanent staff doing the same or a similar job.

  • Employees on fixed-term contracts have full employee status
  • The employment contract must state when the contract is due to end and why it is for a fixed term
  • A fixed-term contract should also state any circumstances where the contract may end early. For instance, if absence cover is no longer required, or there is an unexpected loss of funding for a role
  • Terms can be pro-rata where applicable
  • Fixed-term employees working continually for the same employer for two years or more will have the same redundancy rights as a permanent employee
  • Fixed-term contracts can be used for a period of up to 4 years’. After this, employees are entitled to a permanent contract, unless the employer can show why a fixed-term contract should continue
  • Normal employment procedures should be followed, including any disciplinary, capability and grievance processes
  • A fair termination process must be followed if a contract needs to end early

Ending or Extending the Contract

Employers do not have to give notice that a contract is due to end on a pre-agreed date. However, it is good practice to confirm details with the employee ahead of the end date.

There may be occasions when a contract needs to end early. For instance:

  • when project funding is unexpectedly pulled
  • if the substantive postholder returns to work earlier than expected, for instance from maternity leave

If a contract ends early, give as much notice as possible to the employee. It’s worth noting that employers’ may be legally obligated to pay the individual for the full contract term. This will depend on the contract terms and why the contract is ending early.

If the fixed term contract has lasted for more than 2 consecutive years, the employee will be legally entitled to a redundancy payment when the contract comes to a natural end.

If an employee is not performing as required, normal HR policy and procedures such as disciplinary, capability or sickness absence should be followed to legally end the employment relationship. Under these circumstances, redundancy would not apply.  

Fixed term contracts can be extended where agreed between employer and employee. Discussions around potential extensions should take place as early as possible to allow both parties to plan.

Do you need advice on using fixed-term contracts in your business? Contact Concilium HR today on 07885 370054 or email debbie@concilium-hr.co.uk

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