Fixed-Term Employment Contracts

The main Acts and Regulations covering workers on fixed-term contracts are:

• The Employment Act 2002
• The Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (SI 2002/2034) which implement the provisions of the Fixed-term Work Directive (1999/70/EC) into UK law
• The Fixed-term Employees (Prevention of Less Favourable Treatment) (Amendment) Regulations 2008 (SI 2008/2776).

What is a fixed-term contract?

A fixed-term contract applies to an employee who:

• Has an employment contract for the organisation they work for.
• Their contract will end on a particular date or on the completion of a specific task e.g. a project.

Examples of fixed-term employees are:

• Employees taken on for up to six months for a seasonal or peak period.
• A specialist employee taken on for the duration of a project.
• An employee taken on to cover maternity leave.

Protection against less favourable treatment

Employers must not treat employees on fixed-term contracts less favourable than permanent employees that are doing the same or largely the same work unless they have objective reasons for doing so. They are also entitled to:

• the same pay and conditions
• the same or equivalent benefits package
• information about permanent vacancies in the organisation
• protection against redundancy or dismissal

If an employer wants to end a contract early

What happens if an employer wants to end a fixed-term contract early all depends on what is written in the contract of employment. If there is a clause in the contract stating that it can be ended early and the employer has given proper notice, then it can be ended, otherwise, the employer may be in breach of the contract.

If the employee is ending the fixed-term contract early, they must give the employee proper notice of termination:

• 1 week if they’ve worked continuously for at least 1 month
• 1 week for each year they’ve worked, if they’ve worked continuously for 2 years or more
• Or as set out in the contract.

If a fixed-term contract is not renewed

Where a fixed-term contract is not renewed this is considered as a dismissal. Employers need to be aware that if the employee has 2 years’ service then they will need to show that the dismissal is fair.

Workers have the right:

• Not to be unfairly dismissed (after 2 years’ service)
• To a written statement of reasons for not renewing the contract (after 1 years’ service)
• They may be entitled to statutory redundancy payments (after 2 years’ service) if the reason for non-renewal is redundancy.

Renewing fixed-term contracts

There is a limit on renewing fixed-term contracts:

• Any employee on fixed-term contracts for 4 or more years will automatically become a permanent employee unless the employer can show there is an objective business reason not to do so or if there is a collective agreement that removes the right to become a permanent employee in these circumstances.
• If an employee continues working past the end of a contract without it being formally renewed, there’s an ‘implied agreement’ by the employer that the end date has changed. The employer still needs to give proper notice if they want to dismiss the worker.

For more information on fixed-term contracts see: https://www.gov.uk/fixed-term-contracts