Many employers offer fixed term contracts which can provide certainty of employment for a specific length of time, however, it is important to remember that they come with certain strings attached. With increasing length of service comes increasing employment rights. After two years service there is the right to claim unfair dismissal and redundancy pay. After four years service under successive fixed term contracts, according to the Fixed Term Employees Less Favourable Treatment Regulations 2002, a worker is deemed to be a permanent employee unless that can be objectively justified.
Many organisations rely on external funding and issue successive fixed term contracts accordingly hoping that the precarious nature of the funding process can be classed as objective justification. However the case of Ball v Aberdeen provided definitive ruling that this is not correct. It has implications for many educational, public sector organisations and charities that tend to issue fixed term contracts.
Fixed term employees have the right to be treated the same as a permanent employee doing the same or similar work. The regulations protect them from any detriment linked to their fixed term status. The exception is where that treatment can be objectively justified. Fixed term workers are entitled to the same level of benefits as their permanent comparator. If this is not possible the employer may have to increase the salary of the fixed term worker in order to compensate them for their loss.
The non renewal of a fixed term contract is a dismissal in law and requires a fair procedure to be followed ie letter, meeting, appeal. If a fair procedure is not followed there is a risk that the worker can claim unfair dismissal if they have two years service.
In a redundancy situation an employer is more likely to terminate fixed term employees. Potentially they risk a claim of unfair dismissal that the workers have been dismissed because they are temporary. Employers should therefore mix fixed term workers with permanent employees in the redundancy pool.
Employers should beware of giving notice early before the end of a fixed term contract ends. The fixed term worker could claim for breach of contract if there is no clause in the contract that will allow early termination. The worker could be awarded the full amount of the wages they would have earned had the contract remained in force by an employment tribunal.