Fixed term employees are often viewed by employers as being a handy, flexible resource who can be used to flesh out the permanent workforce when necessary, and then disposed of when work levels reduce. A common use of fixed-term workers is cover for maternity leave or long term sickness absence. Many people believe that fixed-term employees have less legal protection than permanent staff. However, for many purposes, they have the same rights, and arguably they have an extra level of protection afforded to them by the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002. This article looks at some of the common misconceptions about fixed-term employees.
- An employee who does not have their fixed-term contract renewed cannot claim unfair dismissal
Fiction (mostly). Any employee who obtains the requisite one year’s service is protected from unfair dismissal and this includes those employed on a fixed term contract. Therefore, if an employer is planning on not renewing a fixed-term contract then there must exist one of the potentially fair reasons for dismissal. If a fixed-term employee was hired for a particular project or piece of work and that project or piece of work has finished, then there will usually be a redundancy situation. However, an employer must still carry out a fair procedure in order to protect itself from a claim for unfair dismissal and this includes a search for alternative work. If the work is continuing then it is unlikely that a redundancy situation will exist and therefore an employer may only rely on one of the other potentially fair reasons for dismissal such as capability, conduct or some other substantial reason.
If the employee has less than 51 weeks’ service, then in most cases they will not be able to claim unfair dismissal. However, that is the case regardless of whether they are fixed-term or permanent.
- Fixed-term people are cheaper to employ because they aren’t entitled to the same benefits as permanent staff
Fiction. The very purpose of the Regulations regarding fixed-term employees was to ensure that they do not receive less favourable terms of employment when compared to permanent colleagues. Therefore the general rule is that fixed-term employees should be entitled to the same benefits as permanent employees including pensions, holidays, sick pay etc. However, an employer is entitled to offer less favourable terms where it can show that the difference in treatment is “objectively justified”. In some cases, it will be easy for an employer to objectively justify difference in treatment. For example, where the employer hires a fixed-term employee to cover long-term sickness absence, the employer may be justified in withholding sick pay to the fixed-term employee, as otherwise the very purpose of hiring the fixed term person might be defeated. Also, when someone will be employed for a short period only, there may be little value in allowing them to enter the pension scheme. This may be justifiable based on how little benefit the employee would obtain during that short period and the disproportionate administrative burden on the employer in offering this benefit. Where an employer is treating fixed-term employees less favourably in relation to a particular point, the employer may be able to show that the overall package being offered to the employee justifies the difference. So, for example, in the case of the pension, the employer might consider a better rate of pay.
- Fixed-term employees should always be the first to go when making redundancies
Fiction. This depends on the type of work being made redundant. If fixed-term employees have been working alongside permanent staff and doing similar work then it may be advisable for all employees to be pooled together for the purposes of making selection for redundancy. Failing to do so may open up the risk of a claim for unfair dismissal (if the selected employee has more than 51 weeks’ service), as well as potentially being in breach of the Regulations mentioned above.
- Fixed-term employees are not entitled to redundancy pay
Fiction. Employees who have been employed for two years’ service or more are entitled to statutory redundancy pay in the same way as permanent employees. If an employer has an enhanced redundancy scheme then fixed-term employees should be entitled to the same, unless the employer can justify the difference.
- Fixed-term workers who have been employed for four years automatically become permanent
Fact. This is true in as far as fixed-term employees have been employed on successive fixed-term contracts which span more than four years. For example, an employee who has completed four one-year contracts with no gap in service would automatically become permanent. The same is not true for employees who have worked on one fixed-term contract for, say, five years. Therefore, in order to avoid fixed-term employees automatically becoming permanent, an employer should turn its mind to exactly how long the particular piece of work will last for which that employee is being taken on, before putting together the fixed-term contract. The purpose of this rule is to ensure that employers do not abuse the concept of the fixed-term contract in order to avoid its employees becoming permanent.
In fact, as outlined above, because all employees gain statutory protection from unfair dismissal after 51 weeks’ service, the differences between fixed term and permanent employees are limited.
A carefully drafted fixed-term contract is a useful tool for employers to expand and reduce their workforce for particular projects and upturns in workloads. Engaging an employee on this basis also manages fixed-term employees’ expectations about their anticipated period of employment. However, the terms on which fixed-term employees are engaged should be considered to ensure the employer does not fall foul of its obligations under the Regulations. Employers should always remain cautious when taking the decision not to renew a fixed-term contract to ensure that it protects itself as far as possible by complying with its legal obligations.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243) 836840 or [email protected])