The use of fixed-term contracts is widespread in employment because they offer employers some flexibility in how they engage staff. For example, where employers only have a temporary need for staff, they may choose to enter into a contract of short-term duration. Where the availability of work or funding may be uncertain, employers can engage staff on the basis that any continued employment is contingent on those factors. The purpose of the contract and the need for the employment can be made clear from the outset.
Fixed-term employees have the same statutory rights as other employees including employment protection and also have the right not to be treated less favourably than comparable permanent employees. Where employers engage fixed-term employees, the law requires any differences in treatment on the basis of their fixed-term status to be objectively justified.
- Fixed-term employees have the right to protection from less favourable treatment compared with permanent employees (this protection does not extend to workers who are not employees)
- Employers should apply the pro rata principle unless this is inappropriate
- Employers may consider a 'term by term' or 'package' comparison when comparing terms
- Fixed-term employees may challenge less favourable treatment on the basis of fixed-term status where this cannot be objectively justified by the employer
- An employee who is employed on successive fixed term contracts for four years will be treated as permanent unless the employer can objectively justify the continued use of fixed-term contracts
- An employee on a fixed term contract has the same statutory rights as permanent staff, notably the right not to be unfairly dismissed following two years' employment.
- Non-renewal of a fixed-term contract will usually be because of redundancy or some other substantial reason (SOSR)
- Employers should ensure that fixed-term contracts contain a provision to allow for the early termination of the contract with notice.