Fixed Term Contracts: What Are They & How Can They Come To An End? - More Than Accountants

Fixed Term Contracts: What Are They & How Can They Come To An End?

Fixed Term Contracts are quite popular among companies. It is used as a way of filling the gap for employees who are hired temporarily. But sometimes this can also be abused. Here, we will discuss what a Fixed Term Contract really is, how does the law protect it and what will transpire when they come to an end.

What is a Fixed Term Contract?

Fixed Term Contracts are provided to employees and it will expire based on a specific term. For instance, when a certain project or task has been completed. Or sometimes it will depend on specific circumstances such as if the employee is working on behalf of someone who is currently on sick or maternity leave.

Employees who are on Fixed Term contracts (FTC’s) are also classified as PAYE Employees. When an employee is on a Fixed Term Contract, the employer should provide a written statement of terms and conditions, also referred to as the contract of employment. This document will show when the contract will terminate as well as the reason for its fixed-term period.

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The Fixed-Term Employees Regulations 2002

If you are on Fixed Term contracts (FTC’s), then you’ll be glad to know that you are covered by the law under the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002.

The purpose of these regulations is to prevent any abuse on the employees. For instance, it can avoid less favourable treatment of fixed-term employees when working with their permanent colleagues. Also, employees who are on fixed-term contracts must have the same terms and conditions of employment with permanent employees. For instance, they should be entitled to holiday benefits, training, bonus schemes, promotions, pension schemes, redundancy situations, and other types of perks. FTC employees must also be given access to permanent job vacancies.

But there are specific reasons why employers choose not to give those benefits on FTC’s less favourable treatment in comparison with permanent employees. However, these reasons must be genuine and sincere.

The law also protects FTC employees against successive use of fixed-term contracts when in fact employers can provide them with permanent contracts.

But there are certain things that you need to remember. For instance, these regulations are not applicable to casual workers, agency temps, contractors, and freelancers. In June 2013, there was a certain case in Italy that went through the European Court of Justice which ruled that the rights under the EU Fixed-Term Work Directive do not apply to agency workers.

Agency Workers are not particularly excluded from these regulations. In fact, there are proposals that the UK Government should take action on this matter. Also, these rules do not apply to apprentices.

When compared to a permanent employee, it must be somebody who is working on the same job with the same employer. Nevertheless, an employer is not obligated to offer a post-holder on a fixed-term contract if the job being offered is already made permanent. Employers must provide these FTC employees with access to apply for permanent vacancies. Unless of course if there is a justifiable reason why they should not be given any access.

Based on the regulations, if employees have been employed on fixed-term contracts continuously for four years or more, starting on July 10, 2002, then they should be given permanent status automatically.

Although employers have the option to change the time limit, instead of four years, they could change it to different terms, provided that they are stated in a collective or workforce agreement. However, employees must be aware of this agreement.

If you have been working continuously for four years on a Fixed Term Contract, then you can request a written statement from your employer affirming that you are already a permanent employee. In case your employer refused to give you this statement, despite requesting it, or perhaps gives you some reasons why you should remain on a Fixed Term Contract which you don’t agree, then you can report this to the Employment Tribunal so you can make a claim.

What Happens When Fixed Term Contracts Expire?

In regulation, when an FTC expires, it is considered as a dismissal. Although employees have the right to be fairly dismissed. There should be a fair procedure that must be followed to ensure that employees on FTC receive a fair dismissal. If not, then the employee can go to the Employment Tribunal to make a claim provided that he/she has been employed on FTC for at least two years continuously.

In most cases, one of the common reasons why an FTC expires and the employee is dismissed is redundancy. This occurs when the employee is no longer needed because his work has stopped or reduced, so the employer wants to reduce his number of employees. When this happens, there is a certain redundancy procedure that must be followed by the employer so the employee can be dismissed fairly.

It is the obligation of the employer to inform the employee about the upcoming expiry of their contract and advise them of alternative employment/redeployment. The choice for redundancy must be done in a fairly manner and not just on the basis that the employee is currently on a Fixed Term Contract. The employer must be able to present an objective reason for the redundancy.

If the employee has worked continuously on fixed-term contracts for two years, then he/she should be given a statutory redundancy payment. However, until 2002, employers have the option to let their employees on fixed-term contracts sign a ‘redundancy waiver’. So, if their contract has lasted for at least two years or more, then the employee can waive his right to a statutory redundancy payment upon the expiration of his contract. Nevertheless, this is not permitted anymore. Except if the waiver was done before October 1, 2002, and the employee’s contract has not been extended or renewed since this date.

Aside from redundancy, there are other reasons why a Fixed Term Contract can be terminated legally such as the employee’s conduct, capacity, and SOSR (some other substantial reason). Most often, SOSR is used as a reason when the Fixed Term Contract is used to cover for maternity or sick leave. Obviously, when the time comes that the permanent employee is ready to return to his work then the employee on the fixed-term contract is not required anymore. Although, it is still important that certain procedures must be followed such as consulting with the employee and to look for alternative jobs.

So, for instance, you are an employee on Fixed Term Contract and your job is to cover the person who is on maternity or sick leave. Or you were hired to do a project that is going to end soon. There are no more works available for you so the employer has no choice but to terminate your contract. However, it is still possible that you can make a claim for unfair dismissal in case the employer did not advise you when you first started about the particular purpose of your Fixed Term Contract and the appropriate procedures were not done during the expiry of the contract. There is also a possibility that you can make a claim for redundancy payment as what was discussed above.

If you are not satisfied with the expiry of your Fixed Term Contract, then you have the right to make an appeal on the basis of redundancy procedure or employers dismissal.

Royal Surrey County NHS v Dryzmala

In May 2018, Ms Drzymala filed a claim against Royal Surrey County NHS Foundation Trust and the Employment Appeal Tribunal ruled that Ms Drzymala has been unfairly dismissed. Ms Drzymala worked as a locum consultant for continuous six-month contracts which started in November 2011. She wanted to have a permanent job so she applied in April 2014. Unfortunately, she was not hired, however, the Trust promised her that she might be hired as a ‘speciality doctor’.

When her contract ended in September 2014, the Trust did not renew it. Since she received a letter affirming this then she has no right to appeal. Also, the letter did not mention the previous offer of possible alternative employment, which had not been discussed since April/May 2014.

Because of these circumstances, Ms Drzymala decided to make a claim due to unfair dismissal which the original Employment Tribunal recognised. Even though there is a fair reason for the dismissal since it is considered as SOSR and the contract has expired, yet the Trust failed to make a follow up on the possible alternative employment and did not give her the right to appeal. Because of these reasons, it was considered an unfair dismissal.

Although, the Trust made an appeal, yet the Employment Appeal Tribunal (EAT) concurred with the original Tribunal. According to the Employment Appeal Tribunal (EAT), the employer has no general obligation to discuss alternative employment during the termination of a Fixed Term Contract, but the fact is the Trust previously made a discussion but failed to make a follow up which makes this an unfair dismissal.

Typically, employers can consider discussing any alternative employment when consulting the employee about the expiry of his contract. This is a practical thing to do, just like the redundancy consultation.

Notice Periods

The employer is not required to give any notice once your contract expires on its expected date, however, they may choose to do this. It is also possible that the employer will terminate your contract prior to its designated end date, provided that this is found in your contract and you are given an appropriate notice period. The employer must see to it that this is at least the statutory minimum notice period suitable to your situation.

In case your Fixed Term contract did not mention the notice period and the contract does not permit early termination yet the contract expired early, then there might be a breach of contract and it is possible that you can claim damages for the remaining days prior to the expiry of the contract. You should make a claim at the Employment Tribunal so you can receive your earnings. A claim may not be filed if the reason is the employee’s gross misconduct.

During these circumstances, you may claim damages for unfair dismissal or redundancy pay if you have been employed continuously. However, you can’t make a claim for breach of contract if your contract was terminated on its proper end date or perhaps you were informed that the contract will end early and this is written on your contract. Also, if your employer has given you the proper notice period which is written in your contract.

Regardless of what is the reason for terminating your contract early, it is important that your employer must follow proper dismissal or redundancy procedures.

If you have been working continuously for two years on Fixed Term Contract and your contract ends on its expiry date but it was not renewed or you are given a notice that your contract will end early, then you are entitled to request for a written statement from your employer stating the reasons for ending your contract.

Also, please take note that the advice that we provided here is simply guidance and should not be taken as an authoritative or present interpretation of the law. It can also be considered as specific advice for particular cases. Furthermore, please remember that there are variations in legislation in Northern Ireland.

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