Sometimes it suits employers to hire people for short, fixed periods of time. For example, there may be a specific project with a defined period that requires specialised staff.
A fixed-term contract is an employment agreement which will continue until an agreed date. The term is fixed and it is clearly defined as having a start date and a finish date inserted into the employment contract.
The benefits for an employer of a fixed-term contract is that the employer can conclude the employment relationship upon the expiry date without the need to give reason for termination. An employer that has employees on fixed-term contracts can just elect not to renew the contract.
In this scenario the employee upon reaching the expiry date and not having been offered a renewal is prevented from bringing an unfair dismissal claim or seeking other entitlements such as a notice period.
Issues arise in the event that an employer seeks to bring an early conclusion to the employment contract before the agreed expiry date. In these circumstances, the employer may need to payout the remaining term of the fixed-term contract which might be significant.
Naturally, fixed-term contracts must be genuine in the eyes of the law. An employee who is continually placed on rolling fixed-term contracts may be able to argue that they have had a reasonable continuing expectation that their employment was on an ongoing basis. In this scenario, upon the expiry of the fixed-term contract the employee would be able to bring a claim for unfair dismissal.
If an employer is considering retaining staff on a fixed term contract, it should do so only if there is a genuine expectation that the staff will only be required for a fixed period of time.
Problems can arise in respect of fixed-term employment contracts when employers fail to include termination clauses within the contract. In this scenario, an employer may be stuck with the employee for the fixed term without an ability to terminate the employee within the fixed term.
If an employer has identified a need for an employee for a fixed period of time, they should ensure that their fixed-term contract considers the following:
- Appropriately drafted termination clause that allows the employer to dismiss an employee for misconduct or poor performance before the expiry of the term;
- Where possible, limiting the term of the fixed term contract;
- Making it clear that no notice need to be given to the employee on the expiry of the term of the contract, and their employment will end at that time and their contract will not be renewed.
If you are considering taking on staff for a fixed period of time to meet the needs of your business, Everingham Solomons can assist with drafting the appropriate fixed-term contracts needed, because Helping You is Our Business.
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