Fixed term employees
Some employees are employed on “permanent” contracts i.e. contracts with no specific end date. Others are employed only to cover specific time limited periods or to complete certain tasks. Such fixed term employees enjoy specific protections detailed in this section.
What is a “fixed term employee”?
The Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 define a fixed term employee as a person with a contract of employment which is due to end on a certain date, or when a specific task has been completed or when a certain event does or does not happen.
Examples include employees with contracts of employment for short periods, for example to cover a particularly busy period such as Christmas or employees on fixed term contracts of employment to cover another person’s maternity leave or sickness absence.
The Regulations only offer protection to “employees” rather than extending protection to the wider category of “workers”, therefore these Regulations do not apply to temporary workers.
Who is covered by the Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations?
The Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 specifically exclude agency workers who are defined as persons supplied by an employment business to do work for another person under a contract between the employment business and that other person. So employment businesses will not be liable under the Regulations to either PAYE or limited company contractors who are supplied to clients to work for a specific period or to do a specified task.
The Regulations cover employees who are engaged for a fixed period or for a specific task or until a specific event happens. Such employees will be able to compare themselves with a permanent employee who is engaged by the same employer to do the same or broadly similar work and who works or is based in the same workplace.
What rights do fixed term employees have?
The intention behind the legislation is to ensure that fixed term employees are not discriminated against and receive no less favourable treatment than permanent workers.
The fixed term employee has the right to be treated in no less favourable terms of their contract or be subjected to any detriment or deliberate failure to act by their employer. Examples would include not being given opportunities for training or having to comply with unattainable periods of service in order to qualify for certain benefits. In addition, you cannot force a fixed term employee to waive their rights to claim redundancy on the termination of their contract if employed for more than two years. Dismissal on grounds that the employee has asserted their rights under the Regulations would be automatically unfair.
You also cannot circumvent the rights of employees by issuing a series of fixed term contracts. If an employee is employed continuously for four years or more under successive fixed term contracts, they will be regarded as being permanently employed for the purposes of claiming the right to a minimum period of notice of termination, i.e. one week for each complete year of employment.
A fixed term employee who believes he/she has been unfairly treated has a right to ask their employer for a written statement outlining the reasons for the less favourable treatment. If a complaint is made, the employee is entitled to receive within 21 days a written statement of any justification claimed for such treatment by the employer.
The use of successive fixed term contracts will be limited to a maximum of 4 years and any contract expressed to be a fixed term renewed in breach of this will be regarded as a permanent contract. Service prior to the Regulations coming into force will not count.
Those on fixed term contracts of more than two years’ duration will no longer be able to sign away their rights to a redundancy payment at the end of the fixed term if the contract is not renewed. Any waiver included in a fixed term contract which was agreed, extended or renewed after 1st October 2002 will be invalid.
The non-renewal of a fixed term contract that expires when a particular task has been completed or when a specific event does or does not happen will become a dismissal in law.
Can I justify treating them differently?
The Regulations prohibit less favourable treatment in relation to contractual terms (including pay and pensions, qualifying periods for benefits, opportunities for training and the ability to secure permanent employment) unless such treatment can be objectively justified by a four-stage test:
- There must be a clearly defined business need with measurable benefits;
- The requirement or condition must be an appropriate way of achieving that business need;
- The requirement or condition must not be in any way discriminatory;
- The benefit to the business must be far greater than the impact on the individual.
The employee must show that the unfavourable treatment is on the grounds that they are on a fixed term contract while you have a defence if you can show that it was justified on objective grounds.
Less favourable treatment will be justified if the overall package of terms and conditions offered to the fixed term worker is no less favourable than that of the comparable permanent employee. The comparator will be a permanent employee who does the same or similar work for the same employer in the same establishment or if no such comparator exists at the same establishment then a permanent employee in a different establishment. You will need to consider whether less favourable treatment is objectively justified on an individual case-by-case basis. You can objectively justify different terms and conditions in two ways:
- Term by term
You can approach the comparison by ensuring that every single element of the employment package is completely the same (or pro rated) unless a difference in the term is justified on an objective basis. Sometimes the cost of offering a particular benefit to the employee on a fixed term contract would be disproportionate to the benefit received by the employee so you would be justified in withholding such a benefit. An example is the benefit of a company car which would be particularly expensive if the employee was only engaged on a fixed term contract of three months. There would be other ways of meeting that employee’s need to travel. - Overall package
The Regulations allow for less favourable treatment in relation to certain contractual terms if the fixed term employee’s overall package of terms and conditions is no less favourable than the comparator’s overall package. In this way, you will be able to set off one benefit against another provided that overall the package of the fixed term employee is no less favourable than the comparable permanent employee. For example, the fixed term employee may receive fewer days’ holiday than a permanent employee but may instead receive a higher wage to ensure that overall their package is no less favourable.
The main benefit of the Regulations is that employees with fixed term contracts of employment may not be treated less favourably in terms of their contract or be subjected to any detriment or deliberate failure to act by their employer. The employee must show that the treatment is on the ground that they are on a fixed term contract while the employer has a defence if he can show that it was justified on objective grounds.
How have the Regulations affected the Statutory Sick Pay rules?
The introduction of the Regulations has led to the amendment of the Statutory Sick Pay (SSP) rules, by removing the disqualification from entitlement to SSP of those who are employed for less than 3 months. This means that, by removing the exemption altogether, the effect of the Regulations is much wider in relation to SSP than just in relation to employees with fixed term contracts.
The effect is that temporary workers are also entitled to claim SSP from day one if they are working on assignment when they fall sick, subject to the other statutory criteria being fulfilled e.g. they must be off sick for 3 days before SSP is payable. However, the change will not affect the fact that liability for SSP only continues until the assignment ends or the worker returns to work so that if the worker was only booked into an assignment for two weeks and they are off sick for the whole of the second week, they will only be entitled to two days’ worth of SSP.