Do you need to review your fixed-term contract employees?

Employers need to review employees on fixed-term contracts if they are not to be treated as permanent employees under legislation coming into force this July.

This important provision, designed to give greater security to employees on fixed-term contracts, is introduced under the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002: the legislation states that, where a fixed-term employee who has been continuously employed on fixed-term contracts for four years or more is re-engaged on a fixed-term contract without his continuity being broken, the new contract has effect under the law as a permanent contract (unless the renewal on a fixed-term basis is objectively justified).

The significance of July this year is that, for the purpose of accumulating continuity of service towards the four-year period, service prior to July 10 2002 did not count; accordingly, July 10 2006 is the first date on which an employee's rights under this provision can arise.

When reviewing their current fixed-term contracts, employers need to establish whether any fixed-term employees fall within the scope of this provision. If they do, agreement can be reached with the employee that there is an objective justification for the renewal of the fixed-term contract; otherwise, employers should prepare themselves for requests from such employees for declarations that they are in fact permanent employees and entitled to be treated as such.

July 10 2006

See guidance on the 2002 Regulations on the DTI website