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Fixed-Term Contracts

The London Olympics closed yesterday with an exuberant musical celebration of the UK. Many of the competitors, coaches, nutritionists and other essential support roles are now on their way home. At one time sport was one of the biggest users of the fixed term contract, often because of the relatively short term nature of funding.

But as the economy continues to crawl along, it is becoming more usual for businesses to offer fixed term contracts of employment. This can provide flexibility and access to specialist skills to meet a particular need.

At one time a fixed term contract which provided for the delivery of a particular task could be terminated without the need for either a dismissal or a resignation. The contract terminated because of the completion of the work and there could be no possibility of claiming unfair dismissal.

The effect of the Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 reversed that and so those employed under a fixed term contract may have the right to claim unfair dismissal when the work comes to an end.

A fixed-term employee cannot be treated less favourably than any other employee in your organisation. This means that employees have the right, except where there’s good and justifiable reason, to:

  • the same pay and conditions;
  • the same or equivalent benefits package;
  • access to an occupational (company) pension scheme (except where the fixed-term contract is for less than two years);
  • The right to be informed about permanent employment opportunities in the organisation.

The right not to be treated less favourably include rights in relation to periods of qualifying service and the opportunity to receive training or secure any permanent position within the company.

So if, for example, permanent employees receive benefits based on service, such as an increase in holiday entitlement after a certain period of time, a fixed-term employee should also receive the same rights after the same qualifying period.

Less favourable treatment in relation to particular contractual terms will be justified if the terms of a fixed-term employee's contract taken as a whole are at least as favourable as those of a comparable permanent employee's contract of employment. In some circumstances, an employer can balance a less favourable term against a more favourable one, if it ensures that the fixed-termer's overall package is not less favourable than that of the permanent employee.

For example, a fixed-term employee might be entitled to fewer days' holiday than the comparable permanent employee, but receive the value of this extra holiday entitlement as increased salary. Approach this with care. There are very few cases on this point and one of the few that considered the matter disagreed with this approach and said that the matter must be approached on a clause-by-clause basis.

Something that employers often overlook is that the expiry of a fixed-term contract constitutes a dismissal. Employees have the right not to be unfairly dismissed. If an employee has at least one year’s continuous service (or two years' continuous service if his employment begins on or after 6 April 2012),he may bring a claim that the dismissal was unfair.

Make sure that the expiry of the fixed-term contract amounts to a substantively and procedurally fair dismissal. In most cases in which a fixed-term contract expires, the reason for dismissal will be redundancy.

Therefore the employer must follow a fair redundancy procedure, which includes an obligation to consult with the employee and consider alternative employment. Selection for redundancy must be fair and not made purely on the basis of the employee’s fixed-term status, unless there is an objective reason for this.

Russell HR Consulting provides expert knowledge in HR solutions, employment law training and HR tools and resources to businesses across the UK.

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