The contract just ends at the end of the fixed term, right?
We regularly speak to clients who think that fixed term contracts just end, and they don’t have to do anything regardless of the length of term, or whether the role is continuing after the contract ‘expires’.
This common misconception can create serious issues for employers who aren’t aware of the potential claims that can arise from the wrongful termination of a fixed term contract, such as;
- Less favourable treatment of fixed term workers
- Wrongful dismissal
But if the contract term is less than two years then it doesn’t matter does it?
It does, and employees can make all the above claims regardless of length of service. Also, if the contract term goes beyond two years then they could also claim unfair dismissal if you do not end the contract properly and claim a redundancy payment.
So, what’s the point of fixed term contracts?
Fixed term appointments can be a useful way to resource short term engagements for projects, peak times and cover for protracted absences such as maternity leave, and long-term sickness. They can also be effective in tying employment to funding streams that are available for a fixed period.
What you shouldn’t use them for is for ‘trying out’ an employee before giving them a permanent contract, that’s what the probationary period is for and if you do not end the contract properly the same risks apply to the end of the fixed term contract as to ending a permanent contract during or at the end of the probationary period.
How do I end a fixed term contract?
Fair ways to end a fixed term contract include for misconduct, poor performance and redundancy. Usually, the end of a fixed term contract is a redundancy situation because the reason for the contract ending is because there is no longer a need for the role either because the project has finished, the funding has ceased or the person they were covering for has returned to work.
- Meet with the employee in good time before the end of the contract term (before the period of notice would begin)
- Review the needs of the business and the reasons for the fixed term appointment with them to confirm if there is no longer a need for the role beyond the contractual end date
- Consider if there are redeployment opportunities available within the business that the employee might be interested in/ suitable for
- Serve notice to end the contract
What other issues might I have with a fixed term contract?
Early notice provisions in the terms of the contract are essential otherwise, save for potential gross misconduct cases, you may be in breach of contract if you end the contract early without the relevant notice terms and may be liable for a claim for the balance of salary that they would have earned for the rest of the fixed term period.