Ed Hussey – People Solutions Director
If you’re a business employing fixed term (temporary) employees there are rules you need to ensure you are following. If you aren’t treating your temporary workers the same as your permanent staff or aren’t sure of the rules it is recommend seeking advice.
This guidance relates to people employed directly by the employer on a temporary contract – i.e. NOT through a temping agency.
The most significant consideration is the right of fixed term workers not to be treated less favourably than permanent employees. Also, if you extend the contract, you would need to be aware of the potential implications of successive fixed term contracts.
References to the ‘law’ are to the “Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002”.
Termination and notice periods
Use a contract of employment that clearly sets the end date of the employment but also includes a notice period in the event that a party wants to terminate early. Other types of temporary contracts are available, including ones with review and extend arrangements, but please take advice on the most appropriate type of contract for your individual circumstances. With no notice clause, you would be in breach of contract if you dismissed early.
Careful wording is required to ensure that the employment will terminate automatically on the end date. As with permanent employees, they are entitled to receive a minimum notice period of one week if their contracts are terminated before the expected expiry date and they have completed at least one month’s continuous service. Temporary employees are also obliged to provide their employer with at least one week’s notice of early termination.
Fixed term vs. permanent employees
A fixed-term employee has the right not to be treated less favourably than a comparable permanent employee:
- As regards the terms of their contract; or
- By being subjected to any other detriment by any act, or deliberate failure to act, of their employer.
A comparable permanent employee is an employee who is not on a fixed-term contract and who is working for the same employer in the same establishment doing “the same or broadly similar work”.
The law emphasises that this right applies particularly in relation to:
- Any length of service qualification relating to any particular employment term
- The opportunity to receive training.
- The opportunity to secure any permanent position.
- “Any other detriment” is construed widely and would include dismissal, bullying or harassment and discrimination.
What is less favourable treatment?
Less favourable treatment can occur where a fixed-term employee is given different contractual terms to a permanent employee or where a particular benefit is provided to a permanent employee but not to a fixed-term employee, whether or not the benefit in question is contractual.
Common examples of less favourable treatment are exclusion from a pension, bonus or PHI scheme, a redundancy policy, free or subsidised membership of a gym or a crèche or eligibility for service-related pay increase by reason of the employee’s fixed-term status.
Fixed-term employees should also not be subjected to disadvantages which are not applied to permanent employees, for example, not being given access to promotion opportunities or being selected for redundancy on the basis of their fixed-term status.
An employer’s failure to carry out a particular action in relation to a fixed-term employee could be less favourable treatment if it is normally carried out in relation to a permanent employee. So, for example, less favourable treatment might occur where an employer routinely fails to carry out appraisals for fixed-term employees but does so for its permanent staff. Less favourable treatment could also arise where an employer imposes additional conditions on fixed-term employees which it does not impose on its permanent staff. For example, where an employer requires fixed-term employees to commence work at an earlier time than permanent staff performing the same role.
An employer may be able to treat fixed-term employees less favourably than permanent staff if it can “objectively justify” the treatment. If you think you need to treat them differently however, please ask us for further advice.
Fixed-term employees have the right to be informed of any available permanent vacancies in the establishment at which they work.
Period of service qualifications relating to particular conditions of employment (such as service-related pay scales) must be the same for fixed-term workers as for permanent workers.
Pro rata principle
A pro rata principle should apply i.e. the fixed-term employee should receive the proportion of pay or benefit that the permanent employee is entitled to. Where a particular benefit is offered over a specified period of time (usually annually), for example a season ticket loan, you should consider whether it is possible or appropriate to offer the benefit on a pro rata basis in proportion to the duration of their contract.
Where however you can establish that it is not reasonable in all the circumstances and/or that it is inappropriate to use the pro rata principle, the employee is unlikely to be able to establish less favourable treatment.
Best practice checklist
Audit contract terms and benefits offered to fixed-term employees, looking out for any differences to those offered to permanent staff. Differences in treatment in the workplace should also be reviewed.
Make any necessary changes so that fixed-term employees are offered the same terms, pro-rated or compensatory benefits, or objectively justify any differences.
Keep records of the steps taken to compare and calculate differences in benefits. These can be used to provide information to fixed-term employees being offered and querying pro-rated or compensatory benefits, and, in the worst-case scenario, to defend litigation.
Implement a system for monitoring the operation of fixed-term contracts, so that consideration can be given, in advance, to whether the contract will be renewed. If it will not be, a fair procedure should be adopted for the termination.
Ensure that any permanent job vacancies are notified to a central source so that a “vacancy list” can be prepared and included with the letter notifying the employee of non-renewal, where appropriate. The list should also be displayed on any staff intranet or notice board.
Ensure that the expiry date of any fixed-term contract is diarised, so that decisions can be made in good time as to whether the contract is to be renewed for a further fixed-term, continued indefinitely, or terminated. Ensure that if the employee qualifies for unfair dismissal rights, the employer follows a fair procedure and has a fair reason for termination.