Guide

Understanding fixed-term contracts

Fixed-term contracts and 'less favourable treatment'

A fixed-term employee has the right not to be treated less favourably as regards the terms of his or her contract. A term-by-term approach is required when considering less favourable treatment in this context.

Less favourable treatment happens when a fixed-term employee does not receive conditions or benefits granted to a comparable permanent employee – or receives or is offered a benefit on less favourable terms.

Examples of less favourable treatment would include not being given a bonus or receiving fewer paid holidays than comparable permanent employees.

If you give training to permanent employees, you must not deny fixed-term employees access to it unless it can be objectively justified. In addition, permanent staff must not enjoy preferential treatment for promotion or redundancy, unless objectively justifiable.

The period of service qualifications relating to particular conditions of employment must be the same for fixed-term employees as for permanent employees except where different length of service qualifications is justified on objective grounds.

Written statement

If a fixed-term employee feels less favourably treated because of their employment status or believes their rights have been infringed, they can request a written statement from you detailing the reasons. You must produce this within 21 days. This is your opportunity to clarify why a fixed-term employee receives particular treatment. If you do not believe less favourable treatment has been given, or you have objective justification for it, the statement should say so. The statement might be used at an industrial tribunal hearing.

Although a failure to give a written statement has no direct legal effect in itself, the statement is admissible in any proceedings under the regulations. A failure to provide one allows a tribunal to draw any inference it considers just and equitable (including an inference that you are in breach of the regulations). A carefully drafted written statement can avoid such a possibility and should be provided.

What is objective justification?

Less favourable treatment will be justified on objective grounds if you can show that it is necessary and appropriate to achieve a legitimate and genuine business objective.

Objective justification may be a matter of degree. You should consider offering fixed-term employees certain benefits (eg loans, clothing allowances, etc) on a pro-rata basis. Sometimes, the cost to you of offering certain benefits to a fixed-term employee may be disproportionate to the benefit the employee would receive. This may objectively justify different treatment.

An example of this may be where a fixed-term employee is on a contract of three months and a comparator has a company car. You may decide not to offer the car if the cost of doing so is high and the need of the business for your employee to travel can be met in some other way.

Less favourable treatment in relation to particular contractual terms is justified where the fixed-term employee's overall package of terms and conditions is no less favourable than the comparable permanent employee's overall package.

How do employers objectively justify different conditions?

You can argue that there is objective justification for treating the fixed-term employee differently.

Alternatively, you may prove that the value of the fixed-term employee's overall terms and conditions at least equal the value of those of the comparable permanent employee.

You will need to consider whether less favourable treatment is objectively justified on a case-by-case basis, either comparing term-by-term, or comparing a package of terms and conditions.