What is a fixed-term employment contract? 

by | Dec 9, 2021

A fixed-term employment contract holds the same benefits as a full or part-time contract but with a specific end-of-contract date agreed upon in advance. Fixed-term contracts enable an employer to take on extra staff during busy periods, such as over the Christmas period or summer, without committing to hiring them on a permanent basis. In this guide, we will go through ‘what is a fixed-term employment contract’ and highlight both the advantages and disadvantages for employee and employer, and we’ll be explaining how fixed-term contracts work in practice.

Reasons You Might Use A Fixed-Term Employment Contract

There are many reasons why you might use a fixed-term contract as opposed to an agency service or a permanent contract. Times and circumstances where a fixed-term employment contract is the best option may include:

  • During busy periods, especially for seasonal businesses
  • You require an expert for a particular project, but don’t expect the position to be necessary beyond the project
  • You have received a large order and need extra staff to help fulfil this
  • Require cover for maternity, paternity, adoption leave or long-term sickness

What Are The Benefits Of A Fixed-Term Employment Contract?

Fixed-term employment contracts can be appealing for employees looking to gain more experience. For example, a designer looking to extend their portfolio may benefit from working on fixed contracts for a variety of clients to build varied sector experience. Many professionals who are starting their careers find that fixed contracts help them to decide what they might like to specialise in. They can also lead to more permanent positions and, when this happens, both the company and employee can be more sure that it’s a good fit since you already have experience of working together.

Older, more experienced candidates may also wish to undertake fixed-term employment contracts towards the end of their careers, as this allows them to work without any long-term commitment. The employer also gets a wealth of experience and expertise without the need to commit to paying a high-salary long-term.

Seasonal work can also be a great means for job seekers, or those with a flexible work schedule, to earn some extra money. Many candidates are happy to take on additional work over Christmas and summer periods to fund holidays and top up their income without investing in building a long-term career. To this end, temporary workers are often on a higher hourly rate than is usual.

Some fixed-term employment contracts can offer the opportunity to travel or experience life in a different city or even country. For those who thrive on variety and adjust well to new routines and ways of working, fixed-term contracts can work well. In some professions, fixed-term contracts often offer more interesting work. For instance, a costume designer may prefer to work on fixed-term contracts because it offers travel and variety, as opposed to working permanently for one designer who produces the same types of garments all year round. Fixed-term contracts often appeal to freelancers because the start and end dates allow them to plan their time and book work in advance.

What Are The Disadvantages Of Fixed Term Employment Contracts?

For employees looking for the security of long-term work, fixed-term contracts can be frustrating. Sometimes fixed-term contracts end without you having been able to line up another role, especially since working makes it harder to apply for job roles. This type of work can also force you to travel for contracts which may not appeal if you have a young family or other commitments. When you work for a client or company temporarily, you also have to hit the ground running and ensure you are performing from day one. There is very little time for the learning process in fixed-term employment and very few companies will invest in training for you when you are not a permanent asset. Therefore, although plenty of experience can be gained, you may not receive the same training and learning support you would in permanent employment.

For employers, a fixed-term employee may prove to be a considerable asset but may not be interested in an offer of permanent employment, should you extend one. Fixed-term employees may also not have the same level of loyalty to you as permanent staff, especially if the work is part-time. They may also not prioritise your company over other commitments, as they might if the role offered scope for long-term career advancement.

If you’re hiring on a fixed-term contract basis, especially if it’s for project work which involves sharing company information, you should look at getting a non-disclosure agreement (NDA) drawn up to protect your trade secrets and IP. This is especially important when working with fixed-term contract employees as they are very likely to go on to work for your competitors.

How Do Fixed-Term Employment Contracts Work?

Fixed-term employment contracts are not all that different to permanent employment contracts. The main difference is the end date (or rough end date). Otherwise, you are entitled to all the same rights as any other employee including access to sick pay, holiday pay, benefits, pension and redundancy rights (if your contract exceeds two years). You are also entitled to be notified of any permanent employment roles that become available in the company and have the same rights to be considered as any other employee.

Although a fixed-term employee is entitled to the same benefits as other staff, there are exceptions and opportunities for negotiation. For example, as an employer, you may refuse an employee benefit where there is a reasonable objective. For instance, membership schemes or subscriptions that exceed the length of the fixed-term employment contract.

What Are Fixed-Term Employees Entitled To?

  • Equal pay and conditions as permanent staff
  • Equivalent benefits packages
  • Information about permanent vacancies within the company or organisation
  • Protection against redundancy or dismissal
  • Equal redundancy rights after 2 years or more continual work

Termination Of A Fixed-Term Employment Contract

Fixed-term contracts can end early or be extended depending on the requirements of the employer. Under standard operation, no notice period needs to be given.

Where a contract isn’t renewed:

  • Employees are entitled to redundancy rights after 2 years of continued service.
  • They can apply for a written statement providing the reasons after completing a full year of service.

Where early termination occurs:

  • The employer is in breach of contract if they can’t provide a good reason for the early exit
  • An appropriate term of notice must be set and worked. The minimum notice is 1 week for workers who have worked for at least 1 month, and 1 week for each year worked when workers have over 2-years of continual service
  • Employees must give the appropriate notice (1 week if they’ve worked over a month) when they choose to terminate the contract early

Disclaimer

The above is intended as guidance only and does not substitute legal advice. Please browse our existing Employment Contract services or get in touch with LegalDrop via our contact page if you need assistance. Read more about Employees’ Rights under fixed-term contracts at Gov.uk