Do’s and Don’ts of fixed-term contracts

Fixed-term contracts are a useful mechanism for managing a workforce in certain circumstances. For example, covering a maternity leave, resourcing a special one-off project delivery or managing headcount.

However, they are not a cheat mode for employers. Irish law states that generally employees with fixed-term contracts should be treated no less favourably than permanent employees. With that in mind, here are some top “Do’s and Don’ts” when using fixed-term contracts.

 Do… Understand why you are considering a fixed-term contract

Is it to cover a set period of time, like a maternity cover or a seasonal busy period? Or is it to complete a specified purpose, such as building a CRM? The end date of either of these is known as the objective condition and you must provide this in writing as soon as possible to the employee.

Don’t… Rely on successive fixed-term contracts for one employee indefinitely

You are not allowed to hand out successive fixed-term contracts for more than a four-year period (although you may be able to hand out a single five-year fixed-term contract in the right circumstances). 

Any time you renew a fixed-term contract you should provide a written statement justifying why you are not providing an open-ended employment contract (the norm), and what the objective condition is.

Don’t… Assume that unfair dismissal is not a risk

Whenever a fixed-term contract is not renewed, it counts as a dismissal – even when the objective condition is met. Unfair dismissal could be a risk, although it can be managed to a degree. 

As with other employment contracts, someone cannot normally bring an unfair dismissal case until they have accrued 12-months’ service. If a contract is shorter than this, it won’t normally be an issue. Discrimination is an exception.

You can word the contract so that its expiry under the fixed term will not make it liable to a claim under the Unfair Dismissals Acts if specific statutory conditions are met.

Do… Consider using a probation period

You are still entitled to include a probation period for fixed-term employees on their first contract with you. Just ensure it is proportionate to the length of the contract. If you do renew their contract, subsequent contracts should not normally include probation periods if the employee is continuing in the same or a similar role.

Don’t… Treat a fixed-term employee less favourably than a permanent one (unless you can objectively justify it)

Treating a fixed-term employee less favourably could be obvious such as not giving them access to the same training or pensions arrangements as equivalent permanent employees.

You may be able to treat them differently if you can “objectively justify” it. An example of this is not providing a company car where the fixed-term is not of a length to justify the expenditure.

Do… Ask us for help

As you can see, fixed-term contracts have considerable nuances that mean they should be chosen and implemented wisely. We can help you draft the contracts appropriately providing you extra protections from the outset, as well as be on hand to answer any questions you have throughout the time period of a fixed-term arrangement. Get in touch to find out more.