Supply chain · 24 June 2021

Fixed term contracts – the facts in full

Fixed term contracts - the facts in full

If you’re a business owner (specifically one that hires employees), it is very likely that you’ll find yourself offering a fixed term contract at some point in time. Fixed term contracts are ideal in situations where you need a specific role in your company fulfilled for a set period of time (due to permanent staff being on maternity or sick leave for example). While there are other options available to you, such as freelancers and contractors, often finding a suitable fixed-term employee is your best bet.

Whether you are an employer or an employee, a fixed term contract is a business function that you should have some basic knowledge about, especially before signing into one.

In this article we have a look at everything you need to know about fixed term contracts, starting from the basics and making our way to the finer details.

What is a fixed term contract?

In simple terms, a fixed term contract is an employment contract, between employee and employer, that is specifically created for a certain timeframe. There could either be an end date stipulated in the contract, or the contract will run until a certain task has been completed, or until a certain event does or doesn’t happen.

A fixed term contract is very similar to any other type of employment contract in that it should outline all the details of the job at hand, and these contracts come with many regulations attached to them.

When should a fixed term contract be used?

Fixed term contracts offer a convenient solution to a variety of different situations, and are great when finding someone to fill in for an employee who is currently on sick leave or maternity leave. Fixed term contracts are also incredibly handy during seasonal busy times or when your business experiences a short-term increased workload and you need to source employees for a fixed amount of time.

What should be included in a fixed term contract?

A fixed term contract should clearly state:

  • The starting date of the contract
  • The expected end date of the contract
  • The notice period for if the contract ends earlier than expected
  • The reason for the fixed term contract
  • The roles and tasks that the fixed-term employee will be responsible for
  • The remuneration that the employee signing into the fixed term contract will be paid
The more detailed the fixed-term contract is, the better it is for both parties. The employer and the employee will both know exactly what is expected of each of them. This means that there is less room for miscommunication or misunderstandings which could create issues later along the line.

What rights do fixed term employees have?

Fixed term employees are protected by regulations outlined in the Fixed-Term Employees ( Prevention of Less Favourable Treatment) Regulations 2002. These regulations ensure that fixed term employees are not treated any less favourably than permanent employees, and that no discrimination towards them takes place. Fixed-term employees are entitled to all the same benefits (pension, holiday, bonuses) as permanent employees, and should not be subject to unfair dismissal. Employees working under fixed term contracts should enjoy a comparable wage/salary to permanent workers, in that they should be receiving a similar pay to a permanent worker in a similar position.

Fixed-term employees also have the right to be informed about any permanent positions opening up within the company, and have their fixed contracts automatically turned into permanent contracts after working in the same position for four years.

All fixed term employees need to be paid through the PAYE system. This means that fixed-term employees will need to pay NICs and tax on their salaries if they meet the relevant thresholds. There have been instances of employers acting in a less than desired manner when it comes to their fixed-term employees, so if you are a fixed-term employee, take efforts to ensure that you are being paid through PAYE, and that your employer is paying your necessary taxes, etc.

When do these rights and regulations not apply to?

Keep in mind that casual staff, freelancers, agency temps, apprentices and contractors do not receive the same treatment and benefits that fixed-term employees do. They have their own set of contracts and regulations that apply to them.

What happens when fixed-term employees are dismissed?

When a fixed term contract expires it is seen as a dismissal, and because fixed-term employees should not be subject to unfair dismissals, it is very important that employers treat dismissals with care and attention to detail.

Every dismissal needs a valid reason, and the reason for fixed term employees’ dismissals is often redundancy as the job that they were employed to do has been completed, especially when it comes to expirations.

In cases of redundancy, the employer needs to carry out a fair redundancy procedure.

What is a fair redundancy procedure?

A fair redundancy procedure consists of:

  • Giving the fixed-term employee an opportunity to consult and talk about upcoming permanent employment positions in the business with a manager or an HR rep.
  • The reasons for redundancy should be fair and valid, and be in line with the terms laid out in the fixed term contract. Expiration is a valid reason.
If the employee has been working for the company for two years or more, they should receive statutory redundancy payment for the work that they have put into the company.

Other reasons for dismissal

The other most common reasons for dismissal of fixed-term employees are:

  • Capability (not having the capability to carry out the roles and tasks outlined in the contract)
  • Misconduct (breaking company rules and regulations, or behaving in a way that is not a good representation of the company)
Another common reason for dismissal is SOSR (Some Other Substantial Reason). SOSR is often the reason used for fixed-term employees coming in to fill a gap for another employee who is on maternity or sick leave. When the permanent employee comes back, this will be a substantial enough reason for dismissal. In the cases of a SOSR dismissal, fixed-term employees should still be offered a consultation about any permanent positions within the company, and have the terms of their contract clearly detailed when it comes to the expected end date of their contract.

What notice period do employers have to give fixed-term employees?

If the contract is coming to an end on the expected date that is listed in the fixed-term contract, the employer does not need to give the employee notice of this date, although it may be seen as polite to remind them of this date so that they can make the necessary arrangements.