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Fixed-Term Employment Contracts – How Do They Work?

Fixed term contracts can be used when an employer has a requirement for an employee to work for a set amount of time. Generally, fixed term contracts are used for project work or to provide cover for an employee who will be on leave for a specified length of time, e.g. maternity leave. Fixed term contracts generally expire at the end of the term, and can be used to give both the employer and employee flexibility.

The Law on Fixed Term Contracts

Legislation within the UK protects employees on fixed term contracts to ensure they are not treated less favourably in comparison to permanent employees. For example, employees on fixed term contracts should be entitled to the same benefits as permanent employees (unless the employer can show that there is a good business reason not to do so.).

If a fixed term contract has been in place for 2 years or more, the employee is entitled to bring claims of unfair dismissal at the end of the contract if they are dismissed, with the employer liable for demonstrating the reason for dismissal was fair. If the fixed term contract ends on the agreed date, and the employee has less than 2 years’ service, the employer would not need to give notice.

In order to give notice to an employee on a fixed term contract, it should be clearly defined within the contract. The employer risks being in breach of contract if they give notice and there is no reference within the contract about it being terminated early. Employees on fixed term contracts have the right to the following notice periods:

  • 1 week if they’ve worked continuously for at least 1 month
  • 1 week for each year they’ve worked, if they’ve worked continuously for 2 years or more

Fixed term contracts can be renewed if required and the employee agrees. However, after four years, employees who have continuously been employed by the same Company on a single or a series of successive fixed term contracts, will automatically be classed as a permanent employee.

The main advantage of fixed term contracts is the flexibility it gives employers, particularly during busy seasonal periods or a period of leave, and also provides an opportunity to bring in someone with expert skills. However, recruiting for a fixed term contract role can take longer, as short-term contracts may not seem as attractive to candidates.


What are the rights of an employee on a fixed-term contract?

As well as complying to legislation around fixed term contracts, employers must ensure employees on fixed term contracts;

  • Receive the say pay and conditions as permanent employees;
  • Receive the same (or equivalent) benefits;
  • Are informed about permanent roles within the Company; and
  • After 2 years’ service are protected against redundancy or dismissal.

Can an employee on a fixed term contract become a permanent employee?

After 4 years’ service, an employee on a fixed term contract will automatically become a permanent employee. You can choose to make an employee, on a fixed term contract, a permanent employee prior to the 4 years’ service, if deemed appropriate.

What happens if an employee has continued to work past the fixed term contract termination date?

If an employee continues to work past the date of the end of the fixed term contract, then the contract will continue based on the original agreement and become an open-ended contract, meaning the contract has been extended without a termination date. An employer should either provide the employee with notice or issue a new agreement confirming the continuation of service.

If you would like further guidance or support on HR documentation or require advice on other people management matters please contact Clover HR on 0121 516 0299 or email us at info@cloverhr.co.uk


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