The Basics of Expiry of a Fixed Term Contract

When dealing with the expiration of a fixed term contract it is important to follow the correct procedure. This means familiarising yourself with the law surrounding this area and understanding your legal responsibilities. Our guide Your Responsibilities will tell you more and guide you through each step of dealing with the expiration of a contract with a fixed term.

Below is an overview of how a contract with a fixed term may be worded to ensure it can be brought to an end without causing legal issues:

• The contract will end once a specific task or project has been completed
• A specific period can be included in the contract, for example one month from the start date of employment
• The occurrence of an event, such as the return of someone from maternity leave, will mark the end of the contract

Any employee that is employed on a contract with a fixed term does not have to be given formal notice. Technically, they already know when their contract is to end.

If required a fixed term contract can be renewed once it expires. However, it is only possible to do this for four years. Anyone who continues to be employed in the same role after four years will be treated, in law, as a permanent employee. That is unless there is genuine justification for continued use of a contract with a fixed term.

Once the four years is up an employee may ask their employer to confirm in writing that their contract is now a permanent one.  At this point, if the employer wants to continue to use a fixed term contract, they have to lay out their objective reasons for doing so. This written statement has to be provided to the employee within three weeks of them asking for it.

Not renewing a contract with a fixed term is, from a legal point of view, a type of dismissal. Therefore, if you are not planning to renew an employee’s fixed term contract you need to be prepared to justify your reasons for not continuing to employ them. This means that you must have a legitimate and legally viable reason for not renewing the contract. The work someone is employed to do is no longer necessary is a legitimate reason for non-renewal. However, a firm just wanting to employ someone new or younger is not a legal reason for non-renewal.

Employers need to follow a fair and full procedure if they are not going to renew an employee’s fixed term contract. Firms that do not do so could open themselves up to a claim for unfair dismissal. However, to bring such a claim the person needs to have been employed for at least two years if they first started working for a firm on or after 6th April 2012. For those employed before that date the qualifying period is only a year.

Employers should hold a meeting with their employee prior to either renewing or allowing a fixed term contract to expire. This meeting is not to communicate your decision it is to ensure you are following fair procedure. If you do have to allow a contract to expire, you must always give your employee the chance to appeal. You need to consider their appeal in full and do so fairly.

In some situations, an employee or worker whose contract is not being renewed may be entitled to statutory redundancy pay.  An example would be someone who has been employed by a firm for more than two years and whose contract is not being renewed because the type of work they are employed is no longer available. The termination of a fixed contract does not always have to be collectively consulted upon. However, if the reason for termination of a contract before its expiry date is redundancy a full consultation process involving the employee and their union rep or representative still has to be followed. For more on the subject read our Redundancy guide.

Our Rules and Regulations section also contains useful guidance about the matter.

For more detailed and tailored advice, speak to a trained Hylton Potts legal advisor. You can do so via email or by calling 0207 381 8111.