Volume 16 - May 2002

Fixed Term Contracts

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A fixed term contract is essentially one where the termination date is announced at the beginning of the contract. It has long been established that the termination of a fixed term contract is a dismissal (albeit one where notice was given at the beginning), and many an employer has come to grief by mistakenly viewing fixed term contract employees as without any employment rights.

Subject to the normal service qualifications relating to the right in question, employees on fixed contracts have the same rights as any other employee. They are still able to contract out of their entitlement to redundancy pay if the contract is due to last for more than two years, but this is more than adequately compensated for upon early termination since they are usually due to the balance of the contractual term.

In order to comply with EU Directive on fixed term work, employees on fixed term contracts will, in due course, have to be given access to the same rates of pay/benefits as ordinary employees. This has already happened in part by requiring all employees to have access to a pension scheme (albeit only a stakeholder pension scheme if nothing else exists) and giving statutory holiday rights under the Working Time Regulations. The Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 are due to come into force on 10th July 2002. These will affect fixed term contracts already in force.

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