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Managing Fixed-Term Contracts

In these strange times, with the impact of Covid 19 being felt heavily by many organisations, the importance of having flexibility within the workforce has never been more important to companies throughout the UK.

When workloads may continue to be unpredictable and funding streams time-limited, fixed-term contracts, as opposed to permanent contracts, maybe your preferred option when recruiting new employees. This guidance note is intended to be a HR Resource to companies considering the use of fixed-term contracts. If you are considering HR outsourcing and need either HR support services UK please do not hesitate to contact us and we will happily help

What is a fixed-term contract?

Fixed-term contracts are contracts which last for a specified time with a pre-determined end date.

When should fixed-term contracts be used?

Generally, fixed-term contracts should only be used in very specific circumstances – for example, for the following reasons:

  • For a particular project that requires additional resources or specific expertise;
  • To cover an identified period of staff absence, e.g. long-term sickness, maternity, adoption or shared parental leave, secondments, employment breaks or long-term training;
  • Where short term additional funding has been identified for a position that is not expected to be renewed;
  • To cover a defined period of higher than usual workload.

How long should fixed-term contracts be for?

Fixed-term contracts should always be for a defined period – usually for at least three months and normally for less than two years.

Recruiting to a fixed-term contract

  • When a post is fixed-term it should be advertised as usual – saying very clearly on the advert that the contract is a fixed-term one.
  • The end date of the contract and the reason for it being a fixed-term contract should be stated on the advert.
  • The job description and the contract also need to say that the post is fixed-term and when the fixed-term contract will end.
  • The reason for the contract being fixed-term will need to be expressly stated in the contract of employment.
  • If a post has been advertised as permanent, it should not then be appointed to on a fixed-term basis without the agreement of the prospective employee supported by objectively justifiable reason(s) – for example, because of a change in service need.
  • A position shouldn’t be offered on a fixed-term basis to test performance.  The probation period must clearly be a probation period and not a fixed-term contract.

Employment Law – things to be aware of re: fixed-term contracts

The main acts and regulations governing the management of fixed-term contracts are; the Fixed-term Employees (Protection of Less Favourable Treatment) Regulations and the Employment Act, 2002.  Under the terms of these:

  • Employers must not treat fixed-term workers less favourably than permanent employees doing the same or a similar job.  Therefore, a member of staff on a fixed-term contract has rights to:
    • the same pay and conditions as permanent staff
    • the same or equivalent benefits
    • information regarding any permanent vacancies within the organisation
    • protection against unfavourable treatment
    • not be unfairly dismissed.
  • Fixed-term workers who work continually for the same employer for 2 years or more  acquire the same redundancy rights as permanent employees (including the right to a fair redundancy process, and redundancy pay)
  • Employees on successive fixed-term contracts for 4 or more years are likely to automatically become permanent employees.
  • The non-renewal of a fixed-term contract is a dismissal in law and therefore a fair dismissal process must be followed and there must be a fair reason for the dismissal.   The reason may be redundancy (if the post ceases ) or “some other substantial reason” (if the fixed-term contract ends but the post continues –  for example, where the post has been to cover maternity leave or long term ill-health and the substantive post holder returns to the role).

Ending a fixed-term contract

Contracts will normally end automatically when they reach the identified end date, but it is good practice to give formal notice of the end of a fixed-term contract.

If you need HR consultancy services UK then we can provide a template letter to give notice of the end of a fixed-term contract.

Can I end a fixed-term contract early?

Ending a fixed-term contract ahead of the identified end date can be done (provided the contract allows for it) as long as you still identify a fair reason, follow a fair process, give full contractual notice, and avoid treating the employee less favourably than a permanent employee. However – if the contract itself does not allow for early termination, then the member of staff may be entitled to be paid what they would have earned during the remainder of the fixed-term contract – because the early end is in breach of contract.



If you are in need of further HR resources, or if you require HR support with training, please send us an email or give us a call

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