Greater Manchester Pay and Employment Rights Advice Service Factsheet

FIXED-TERM EMPLOYEES

The Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations were introduced by the UK government in 2002.  The most important principles of these regulations are that employees on fixed-term contracts:

• should not be treated less favourably than comparable permanent employees;
• should not be given contracts which waive their redundancy rights;
• should not be employed on a series of fixed-term contracts which continues for more than four years;
• should be made aware of permanent vacancies within the organisation.

They also give statutory rights to employees on fixed-term contracts of three months or less.  Previously these employees have not had many rights.

Who is covered?

The regulations only apply to “employees”, not “workers” in the general sense. They specifically include other groups such as:

• people in Crown employment;
• House of Commons and House of Lords staff;
• police officers, special constables and cadets;
• people employed under the Reserve Forces Act 1996.

Who is excluded?

Besides “workers”, the regulations also specifically exclude:

• employment agency workers;
• apprentices, even if they have contracts of employment;
• people on certain government-supported training schemes;
• people on higher education courses doing work placements of one year or less;
• serving members of the armed forces.

What is a fixed-term contract?

The regulations define fixed-term contracts as contracts which terminate on the expiry of a specific term, on the completion of a particular act, or on the occurrence or non-occurrence of any other specific event other than genuine retirement.

Employees who are covered by the regulations would therefore include those:

• working on short-term contracts, such as “seasonal” employees taken on to cover busy periods;
• employed to cover for maternity, paternity, parental or sick leave;
• hired to do a particular job on “task” contracts which end when that job is done, for example setting up a database, painting a house or running a training course.

Permanent employees are simply defined as those not employed under fixed-term contracts.

Comparable employees

To benefit from these regulations a fixed-term employee must be able to compare her/himself with a comparable permanent employee.  A permanent employee is “comparable” if s/he:

• works for the same employer, in the same workplace, or is based at the same workplace, as the fixed-term employee;
• is doing the same or broadly similar work, taking into account whether they have a similar level of qualifications, skill and experience where this is relevant.

If there is no comparable employee at that workplace, then a comparison can be made with an employee working for the same employer at another workplace, and who satisfies the other requirements.

Less favourable treatment

The regulations make it unlawful for employers to treat fixed-term employees less favourably than comparable permanent employees:

• in respect of their terms and conditions of employment such as rates of pay, holiday entitlement and access to occupational pension schemes (the rules about fixed-term employees and pension schemes are complicated however, so contact us or a local advice agency for further advice);
• in respect of any other detriment, such as opportunities to receive training where comparable full-time employees receive it.

Waiving redundancy rights

Until 1^st October 2002 it was possible to enter into fixed-term contracts of employment which ruled out or “waived” redundancy claims.  Waivers in contracts entered into before that date will stand until the renewal or extension of those contracts.  However the regulations make it unlawful for employers to require employees on fixed-term contracts to agree to such waivers in contracts entered into on or after that date.

Permanent vacancies

The regulations say that employers have to inform fixed-term employees about permanent jobs available, for example by displaying a vacancy on the notice board, or by e-mailing it to all staff.

Four year limit

The regulations restrict the use of fixed-term contracts to a period of four consecutive years, with the same employer. There are, however, no restrictions on the length of the first fixed-term contract.

In very limited circumstances the law allows employers to continue to employ a person on a series of fixed-term contracts beyond the four year limit.  Employers would have to show that the further use of fixed-term contracts was necessary, and that it was an appropriate way to achieve a “legitimate objective”.

It is possible for the rules about the four year limit to be modified by a collective agreement (between a trades union and an employer or group of employers), or a workforce agreement (between workforce representatives and an employer where there is no union recognition).

The pro-rata principle

The regulations say that pro-rata calculations must be used where appropriate to set terms and conditions for an employee on a fixed-term contract in comparison to a relevant permanent employee.  This rule would apply in working out salary and holiday entitlement for example where a fixed-term employee is employed for less than a year.  To give an example, where a fixed-term employee is employed for a nine month period, s/he must be given 75% of the annual salary and holiday entitlement enjoyed by a comparable full-timer.

Fixed-term contracts of three months or less

The regulations lay down special rules about these very short-term contracts.  Employees on this type of contract:

• have the right to receive Statutory Sick Pay from the first day of employment if their earnings are high enough for National Insurance contributions to be deducted from them;
• have the right to guarantee pay if laid off or on short-time working (see our factsheet “Lay Off and Short Time Working” for details) if they have been employed for one month or longer;
• have the right to medical suspension pay under Health and Safety provisions if they have been employed for one month or longer;
• fixed-term employees on “task” contracts expected to last three months or less, who have been employed for one month or more, will have to give or be given one week’s notice if they or their employer wants to terminate the contract before the job they were employed to do has finished.

Termination = dismissal

The automatic expiry of a fixed-term contract on its termination date is classed as a dismissal.  Employees on fixed-term contracts which aren’t renewed or extended may be able to claim unfair dismissal and other statutory rights, if they meet the qualifying conditions.  The employer will have to show that the dismissal was fair.

Written statement

If an employee on a fixed-term contract believes s/he has been treated less favourably than a comparable permanent employee, or not informed about a permanent job, then s/he can ask the employer for written reasons why.  The employer has to reply within 21 days.  The reply, or the failure to reply, can be used as evidence at Employment Tribunal if the employee decides to make a claim.

Unfair dismissal

Employees on fixed-term contracts can claim unfair dismissal at Employment Tribunal from day one of their employment if they believe they have been sacked because they tried to claim their rights under these regulations. See our factsheet Unfair Dismissal for more information if necessary.

Less favourable treatment and victimisation

If an employee feels that they have been treated less favourably than a permanent employee and aren`t satisfied with the response from their employer, or if they feel that they`ve been victimised for asserting their rights under these regulations then they should send their employer a grievance letter; see our factsheet on Grievances for guidance about doing this. They also have the right to make a claim to Employment Tribunal but if they haven`t sent a grievance letter first then any compensation they are awarded may be reduced.

This factsheet is a general guide only and not a full statement of the law. You should take advice before taking action.

If you need more information about pay and employment rights, contact

Greater Manchester Pay and Employment Rights Advice Service

( 0161 839 3888 phone and answer machine)

4^th Floor, Swan Buildings, 20 Swan Street, Manchester M4 5JW

We provide telephone advice only and cannot see people face to face.

or visit our website: www.gmemploymentrights.org.uk

Trade Unions

Trade unions help workers to get better pay and work conditions.

For further information contact us or:

North West TUC, Suite 506-510, The Cotton Exchange, Old Hall Street, Liverpool L3 9UD

Tel: 0151 236 5432

Greater Manchester Pay and Employment Rights Advice Service is an independent research and information body funded by all local authorities in Greater Manchester under the AGMA grants scheme:

August 2010