Five Key Points an Employer Needs to Know About Fixed-Term Contracts in England

Employment contracts are a key aspect of employment. They detail the terms that govern the relationship between you and your employees, including the obligations you owe one another. However, employment contracts come in different shapes and sizes. A fixed-term employment contract is one type of agreement with a predetermined fixed date at which the relationship ends. 

This article will explain five key points you, as an employer, need to know about fixed-term contracts in England. 

How to Spot a Fixed-Term Contract

A key point to appreciate is how to identify fixed-term contracts. All fixed-term contracts have a term which specifies when the contract comes to an automatic end. This will usually be expressed as either:

• a particular date;
• the completion of a particular task; or
• the end of a project.

Certain kinds of workers may work on behalf of your business with contracts that the law will not recognise as fixed-term contracts. These include:

• agency workers contracted through an agency; 
• individuals on a work placement, such as students or certain kinds of trainees; 
• individuals with contracts of apprenticeships; and 
• members of the armed forces.

The Rights of Fixed-Term Contract Employees

It is vital that you are aware of the rights that fixed-term employees have, as these rights impose obligations directly upon you as an employer. 

If you employ other individuals on a full-time permanent basis but who otherwise have a similar job, you must treat your fixed-term employees as you treat your permanent employees. The exception is if you have a reasonable business reason for treating them differently. For example, you might offer permanent employees certain benefits not available to fixed-term employees because the cost of the benefit is not justified given the length of their contract. 

Otherwise, your fixed-term employee has the right to the same as their equivalent permanent colleagues in terms of:

• pay;
• conditions;
• benefits;
• permanent vacancy information; 
• protection against redundancy if they have worked for you for at least two years; and 
• protection against dismissal.

Not Renewing Fixed-Term Contracts

Fixed-term contracts differ from permanent ones as you do not need to give your employee notice to dismiss them as you have already agreed on an end date. This is because the contract automatically comes to an end. 

However, you should only choose not to renew the contract for sensible reasons. In other words, you should not unreasonably refuse to renew the contract. Likewise, where your fixed-term employee has been employed with you for at least one year, you should provide them with a a written statement as to why you are not renewing the contract. 

Additionally, you must ensure that you do not unfairly dismiss your employees who have worked for more than two years for your business. Otherwise, they may be eligible to claim unfair dismissal.

Terminating Fixed-Term Contracts Early

There may be times when you decide that you need to end your employee’s fixed-term employment contract earlier than the agreed end date. 

If you want to end your employee’s fixed-term employment contract early, you can only do so if the fixed-term contract says you can. This term should also detail the correct notice you must give the employee.  If the contract does not contain details on the amount of notice, you must:

• give your employee one week’s notice if they have worked for you continuously for at least one month; or
• if they have worked continuously for you for at least two years, one week per year of employment.

Extending Fixed-Term Contracts

As an employer with fixed-term staff, you may wish to extend a fixed-term contract for longer than the stated term.

You do not need to formally renew the contract for the fixed-term contract to end later than the agreed end date. Instead, if you allow your employee to do their work after this date, there is an implied agreement that you have decided to change their contract end date. If you wish to dismiss your employee later, you still need to give them the correct notice.

If a fixed-term contract lasts longer than four years, whether by an express term or implied term, your employee becomes a permanent employee. This is automatic unless you can demonstrate a good business reason why this is not the case.

Key Takeaways

If you employ staff on fixed-term contracts, there are certain points you may wish to familiarise yourself with. For example, you should be mindful of how you can bring a fixed-term contract to an end. In some cases, ending a contract earlier constitutes dismissal. As such, the reasons must not be unreasonable, unlawfully discriminatory or unfair, especially where an employee has two or more years of service. In some cases, if you end a contract early, you will be in breach of your obligations, which means your employee may be able to claim against you at a tribunal.

If you need help understanding fixed-term employment contracts in England, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.

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