Fixed term contracts are covered by a piece of legislation called the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002.
What are acceptable reasons for fixed-term contracts?
Fixed term contracts are used in a variety of situations including:
- resourcing a particular project or piece of work, which has a defined date for completion
- covering a period of long term sickness absence, family related leave such as maternity or adoption leave
- where funding has been provided to carry out a particular task or activity.
- covering a temporary peak in demand
This is not an exhaustive list, but it provides examples of when it would be appropriate to use a fixed term contract.
A fixed term employee is defined as a person with a contract of employment which will terminate at a future date when a specific ‘term’ expires.
Fixed term contract
It is important that the reason why the contract is formed for a fixed term is made known to the employee from the outset and is clearly and accurately stated in the job description, the letter of appointment and the written statement, for example:
- The contract is fixed term and will end on (insert date) when funding ceases
- The contract is fixed term for a period of up to 1 year for the purpose of completing a project relating to (insert details). The contract will end on (insert date) or on completion of the project
- The contract is fixed term for a period of up to 1 year to cover maternity leave. The contract will end when the post holder returns from maternity leave.
Some contracts may be funded from a source where the continuity is uncertain. These are not suitable for fixed term, especially if the contract will last for more than 2 years. It would however be appropriate to state on the advert, in the job description, or the supplementary information, and again in the letter of appointment that the continuity of the post is dependent on continued funding.
Employees on fixed term contracts must receive no less favorable treatment than employees in equivalent employment on open-ended contracts (e.g. holiday entitlements, training, in redundancy situations, in promotion situations, pension schemes, access to permanent job vacancies). An employee on a fixed term contract has a right, at any time, to request a written statement confirming the reasons for the contract being offered on a fixed term basis.
It is advisable to include a notice clause in a fixed term contract to enable the employer to give notice to terminate the fixed term contract before the expiry date, should this situation arise.
If an employer brings a fixed term contract to an end before the expiry date, and there is no provision to do so in the contract, then the employer has committed a breach of contract. An employee can bring a claim for wrongful dismissal and seek damages for breach of contract and loss of money and benefits due to him/her for the remainder of the fixed term.
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Written Statement of Terms and Conditions
Downloadable Templates: Written Statements of Terms, Offer Letters and Policies
When fixed term contracts become permanent
Under the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002, regulation 8, an employee who has been engaged on a series of continuous fixed- term contracts for four years or more will automatically be entitled to have his or her new contract treated as a permanent contract unless the employer can objectively justify the employees continuing engagement on a fixed- term basis.
Where a fixed-term employee has four or more years’ continuous service the employee will be entitled to request a written statement from the employer confirming that his or her contract is now a permanent contract.
Ending Fixed Term Contact
When a fixed term contract comes to an end and there is no requirement to continue the contract, in law, this is considered to be a dismissal.
Therefore, the employee has the right not to be unfairly dismissed and there are a number of statutory rights on the same basis as employees working under permanent contracts. These include:-
- The right not to be unfairly dismissed (After 2 years service)
- The right to a written statement of reasons for dismissal
- The right to statutory redundancy payments (After 2 years service)
In many cases where a fixed term contract expires, the reason for dismissal will be redundancy (as the requirement for the employee to do the work has ceased or diminished and there is a reduction in the number of employees). Therefore churches and employing bodies must follow a fair redundancy procedure which includes:
- An obligation to consult with the employee about the forthcoming expiry of their contract and consider alternative employment/redeployment
- A fair selection for redundancy which is not made purely on the basis of the employee’s fixed term contract status – there must be an objective reason for the redundancy.
- The details of the meeting and opportunity to appeal should be confirmed in a letter to the individual. It’s important to note that this procedure should be carried out when all fixed term contracts come to an end, even in situations where there is a definitive expiry date of the contract.
- If the employee has at least two years continuous service, he/she will be entitled to a statutory redundancy payment.
Common misconception
‘…the expiry of a fixed-term contract cannot have any legal consequences’
This is incorrect, it can, even though the parties agreed at the outset that the contract would come to an end. Expiry without renewal amounts to a dismissal (see above). And, although the employing body generally has a leverage in defending any allegation of unfair dismissal (the expiry was agreed at the outset and is often because there is no more work), potentially there still can be problems.
Difficulties can arise if an employee was not offered continuation in the role under another contract (and someone else was recruited) because of some unacceptable reason. Or, it could be that, although the post lapsed with the expiry of the contract, there was alternative employment that was not properly considered. In any event, there is always the need for an employer to notify (or remind) the employee of the prospect that employment will end and to apply an appropriate pre-termination procedure.