Rights Under Fixed-Term Contracts | Under Vs Over 2 Years’ Service

Employees are on a fixed-term contract if they have an employment contract with the organisation they work for, and their contract ends on a particular date or on completion of a specific task.

However, they are still classed as an employee, and they are entitled to certain rights. That said, the rights of a fixed-term employee differ, depending on their length of service.

Under two years' service

Employers must not treat workers on fixed-term contracts less favourably than permanent employees who are doing the same or largely the same job unless the employer can show that there is a good business reason to do so (known as ‘objective justification’).

Objective justification

If an employer is treating a fixed-term employee less favourably, it must be able to show a good business reason, but what does this mean in practice? Here’s an example that demonstrates objective justification in the real world.

John is a fixed-term employee on a six-month contract. A permanent employee doing the same job has a mobile phone, but John’s employer may choose not to offer him one for such a short period if the cost is too high and the business need for the employee to have a phone can be met in some other way.

Employers must ensure that fixed-term employees receive the following unless it can be objectively justified not to do so:

the same pay, conditions, and the same or equivalent benefits as permanent staff
information about permanent vacancies in the organisation
protection against redundancy or dismissal

For example, if an employer offers permanent staff an annual bonus, the employer should pay an employee on a fixed term six-month contract 50% of the bonus, as they are entitled to the same or equivalent benefits - unless there is a particular reason why it is not appropriate to do so.

This can even happen with more simple benefits awarded by the organisation. If employees are provided with benefits for a specified period, for example, an annual gym membership, employers should consider whether it is possible or appropriate for them to offer the benefit to fixed-term employees in proportion to the duration of their contract.

Other examples of less favourable treatment include exclusion from a pension, pay rises, or private medical insurance schemes.

Over two years’ service

Anyone who has worked continually for the same employer for two years or more, whether on a fixed-term contract or not, has the following additional rights:

the same redundancy rights as a permanent employee, including the right to statutory redundancy pay
the right to bring an unfair dismissal claim when their employment ends. Employers will need to have a fair reason and follow a fair procedure before the contract expires

The ending of a fixed-term contract is not a fair reason to terminate an employment contract and an employer will have to rely on one of the other potentially fair reasons. Therefore, whilst fixed-term contracts are a good idea when there is a clear need for them, such as to cover short-term maternity, they should not be used as standard when a permanent contract could be used instead.

Furthermore, employees who have been continuously employed for four years or more on a series of successive fixed-term contracts are automatically deemed to be permanent employees, unless the continued use of a fixed-term contract can be objectively justified.

If you are a fixed-term employee confused about your rights, or an employer uncertain if your policies are disadvantageous, please contact our friendly employment law team for expert advice.