Fixed term contracts: Risk or Asset?

Published: 3rd October 2008

The Hefce Report on staff in Higher Education shows that the proportion of academic staff on permanent contracts rose from 63% to 70% in the three years from 2003/2004 to 2006/2007. As the use of fixed term contracts reduces, we look at the advantages and risks with their use.

Fixed term contracts can be useful in ensuring that the expectations of employees are limited. An employee is less likely to be aggrieved if their contract ends and as a reason for leaving it may assist them in their job hunt. If people are not aggrieved, they are less likely to bring claims. However, legally, fixed term contracts provide very little additional protection to employers.

Someone employed on a fixed term contract for more than a year can still claim unfair dismissal. An employer must have a fair reason for termination and must follow the statutory dismissal procedures even if the employee's contract says it will end on a certain date. Employers are also vulnerable to discrimination claims on any of the unlawful grounds (sex, race, age etc) if contracts are ended or not renewed, particularly where comparable employees are treated differently. Employees on fixed term contracts also have the additional right not to be treated less favourably than employees on a permanent contract, giving them one more potential claim than permanent staff if the relationship breaks down. The real danger with fixed term contracts is that managers make decisions in a less thought through and evidenced way than they would if they were dismissing permanent staff, and without following a dismissal process. This causes significant problems in defending tribunal claims.

Fixed term contracts in practice are often used to fit with the period of funding available for a role. If funding ends or is not renewed, then the termination of the employment can be fair (being either on the grounds of "some other substantial reason" or redundancy). However, it is still important that organisations meet with the individuals, talk to them about the process, offer them an appeal, and consider alternative options available.

So should fixed term contracts ever be used at all? Once employees have cleared a year's service, the nature of their contract is not overly important, it is the fairness of the reasons for the decision to terminate which is important. Standard practice and staff expectation may lead organisations to continue to use fixed term contracts, however the danger is that such staff are considered to be more expendable when in fact they still have significant, and often overlooked, rights.