Fixed term contract


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Employment law- Fixed-term contracts

What is a fixed-term contract?

A fixed-term contract is a contract of employment which ends either:

·       on a particular date;

·       on the completion of a particular task;

·       when a particular event does or does not occur.

When are fixed-term contracts used?

Fixed-term contracts are commonly used for seasonal employees during busy periods, providing cover for sickness or maternity leave, and employees brought in to complete a special projects.

Some employment contracts may look like fixed-term contracts, but do not in fact meet the requirements. These include:

·       Contracts which require notice to be served before the expiry date if your employment is to end at that time,

·       Contracts for an initial fixed-term during which notice may not be served, but become open ended after that term expires, and

·       So called ‘evergreen contracts’ which are automatically renewed after each successive fixed term unless notice is served.

Will my contract become permanent if I stay for long enough?

If you have been employed on successive fixed term contracts for over four years, your employment will become permanent, and the continuous renewals will have no effect (unless they can be objectively justified).

This automatic transition to a permanent employment includes situations where:

·       Your original fixed-term contract has been renewed or extended, or

·       Successive, but different, fixed term contracts have been entered into.

It does not include a single fixed term contract lasting four years or more. If your first fixed-term contract is renewed or extended after four years have passed, then your contract will become permanent on the date of the first renewal.

If you believe your contract has become permanent, you can write to your employer requesting a statement to that effect. If your employer is seeking to deny that you have become a permanent employee they must reply within 21 days in writing providing you with full reasons.

Continuity of employment

It is important to establish continuity of employment to check whether you have qualifying service for unfair dismissal, and to establish that you have become a permanent employee after four years.

Your continuity will be broken if you are not employed for a full week ending on a Saturday at any time. For example, if one fixed term contract ends on a Saturday, and you are away and not working for the whole following week before the next contract is signed and you return then your continuity will be broken. However, if your contract expires on a Wednesday, and you return the next Thursday, you will have worked for part of each week and your continuity will be preserved.

There are three exceptions where a break of a full week between your fixed-term contracts will not break continuity:

·       If you (the employee) are away because of illness or injury.

·       If you are away from work because there been a ‘temporary cessation of work’ whereby your employer is unable to provide you with work. For example, continuity would be preserved for a teacher working on an annual fixed term contract simply because no work is available over the summer holidays.

·       If you are away from work under circumstances which, by arrangement or custom, mean that you are understood to still be in employment. For example, you could be away for a week between fixed-term contracts on the understanding that your contract will definitely be renewed on your return. This could be explicitly stated by your employer, or implied if you are allowed to keep any badges, passes or other company property while you are away, or if you are allowed to carry over outstanding holiday to the renewed contract.

If you are unsure whether your continuity has been broken, it is wise to seek legal advice.

 

What are my rights as a fixed-term compared to a permanent employee?

As a fixed-term employee you have the right not to be treated less favourably than permanent employees doing similar roles. The right to equal treatment includes the terms of your contract, payment, contractual benefits (such as pension rights), training and development, and opportunities to secure a permanent position.

This protection extends to former fixed-term employees who have become permanent if the less favourable treatment arises from your former status as a fixed-term employee. However, the protection extends to employees only, and does not cover workers.

A defence is available to your employer if they can objectively justify why you are being treated less favourably than comparable permanent employees. For example, if a comparable permanent employee is offered a company car and you are not, it might be objectively justifiable if the cost to your employer of offering you a care would be disproportionately high, and compensation for your travel could be provided in some other way.

You have the right to request a written statement of reasons from your employer if you believe you are being treated less favourably than permanent employees. Your employer must respond in writing within 21 days.

Less favourable treatment claims must be made within 3 months less one day of the date that the last unfavourable treatment took place. There is no limit on the amount of compensation which can be awarded for less favourable treatment, but any damages awarded would be directly related to losses you have suffered as a result of the less favourable treatment.

You also have the right to be informed of any permanent vacancies in the organisation, and all standard employment rights such as sick-pay, holiday pay, the right not to be wrongfully, unfairly dismissed, or discriminated against.

What notice am I entitled to?

Your notice entitlement will depend on the construction of your fixed-term contract.

If you have a so-called ‘pure fixed-term contract’, which does not allow for either you, or your employer, to terminate the contract before the expiry of the initial fixed term, then your employment will automatically end on the expiry date, and your employer does not have to give you any notice. The length of the fixed-term is irrelevant in these circumstances.

If your contract allows you or your employer to terminate the contract before the expiry of the fixed-term, then the usual statutory minimum notice periods apply (1 week for every year worked up to a maximum of 12 weeks). Your minimum notice entitlement will depend on your length of continuous service. For what counts as continuous service for fixed-term contracts please see below.

If your contract specifies a longer notice period than your statutory minimum entitlement then that will apply.

What happens when the contract comes to an end?

When your fixed-term contract expires, your employer may or may not wish to keep you on.

If your employer does wish to keep you on, then the question arises as to what your new terms of employment are. If the new terms are not expressly agreed between you and your employer, then they will be implied by law.

Your employer may opt to renew or extend your original fixed-term contract on the same terms as before. However, if nothing is said about how long the contract will be extended for, then it is implied that you are now an indefinite, rather than fixed-term, employee. If the extension of your contract is indefinite, but silent on notice, then a reasonable notice period will be implied, what counts as reasonable will depend on the type of work you do, your length of service, and seniority.

The non-renewal or extension of a fixed-term contract on the same terms as before constitutes a dismissal. This is true even if your employer offers you more favourable terms than before (although it is questionable as to whether this would ever amount to unfair dismissal).

Often, employers will simply decide not to keep you on after the expiry of your fixed-term contract, or they may offer to renew your fixed-term contract on less favourable terms. If this happens, then you will have the same employment rights as a permanent employee with the same length of service.

See below for when non-renewal of a fixed term contract may amount to unfair dismissal.

Am I able to claim unfair dismissal with a fixed-term contract?

Fixed-term employees have the same rights as permanent employees with regards to dismissal, including the right not to be unfairly dismissed. This is subject to the usual principles governing unfair dismissal. In order to claim, you must have worked for your employer continuously for at least 23 months and 3 weeks without being given notice which will expire before you have worked for two years. Continuity of service is sometimes an issue where fixed-term contracts have been renewed once or more. See the section on continuity of employment below for more details.

If you have a qualifying period of service, your employer must have a potentially fair reason for dismissing you they must follow a fair procedure, and dismissing you for that reason must be within the range of reasonable responses a reasonable employer would make. For more general information see our page on unfair dismissal.

If you have been dismissed by non-renewal of your fixed-term contract, the mere fact that your contract has expired will not count as a fair reason for dismissal.

However, if your fixed-term contract was to provide maternity cover, and the employee for whom you were covering is returning to work, then your employer will be able to rely on “some other substantial reason” as a fair reason for dismissal.

If you were brought in to complete a particular project, then your employer is likely to rely on redundancy as the reason for your dismissal. As with other dismissals by reason of redundancy, your employer is under a duty to look for suitable alternative roles for you within the company. However, if you were brought in to undertake a special project which has been completed, it may be relatively easy for your employer to show that no suitable alternative roles are available.

 

Can I claim discrimination?

Generally, yes you can. Fixed-term employees have the same rights as permanent employees for the purpose of discrimination claims.  If you are a fixed-term employee and you have been discriminated against, harassed, or victimised on the basis of a protected characteristic under the Equality Act, then you may make a claim under the Equality Act 2010 and the usual rules governing discrimination will apply (see our pages on discrimination for more information).

If you feel you have been discriminated against simply because of your status as a fixed-term employee, this will give rise to a separate claim of less favourable treatment (see above).

Who cannot be classed as fixed-term employees?

You will not be classed as a fixed-term employee if you are:

·       A worker,

·       An agency worker,

·       Undertaking government or institution-funded or sponsored training, work-experience, or a temporary work scheme,

·       In the armed forces, or

·       A student undertaking a placement (for up to a year) as part of your higher education course.

If you are seeking to establish whether you are a on a fixed-term contract, it is important to look closely at your contract of employment to check whether it meets the requirements.

We are a leading firm of employment law solicitors, acting for employees and senior executives in the City and throughout the UK. For more information on bonuses and a free consultation, please get in contact on 020 7100 5256 and ask to speak to Philip Landau or any member of the employment team, or email us.

 

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