Understanding fixed-term contracts

Fixed-term employees have a right to statutory redundancy pay if they have been continuously employed for two years or more. Redundancy is defined in statute and the Labour Relations Agency (LRA) can provide you with information and advice on redundancy.

When a fixed-term contract terminates and is not renewed, the employee is dismissed. The reason for this dismissal will not always be redundancy - this will depend on whether you are laying off employees of the type that the fixed-term employee is, or whether there is some other reason for not renewing the contract (for example, the fixed-term employee was covering for an absent member of permanent staff).

Fixed-term employees cannot be excluded from the statutory redundancy payments scheme. However, they can be excluded from contractual schemes if this is objectively justified.

Fixed-term employees should receive the same level of redundancy payments as permanent employees unless different treatment is objectively justified.

You also need to consider whether fixed-term employees are being treated fairly in relation to other elements of redundancy packages, eg have the same access to specialist job search services as comparable permanent employees. Different treatment may be objectively justified and it is more likely to be so if the fixed-term employee did not expect their employment to last longer than the term of their first contract.

Selection for redundancy

Fixed-term employees cannot be selected for redundancy simply because of their employment status. Where fixed-term employees have been brought in to complete a particular task or as cover over a peak period, you can objectively justify selecting them for redundancy at the end of their contracts.

Length of service (Last In First Out) should never be used as sole/main criteria in a redundancy situation as it may indirectly discriminate on the grounds of age (and potentially religion where an employer has been taking positive action to address an underrepresentation from one community in their workforce). It can be used in conjunction with other criteria or perhaps applied in tie-break situations. See redundancy selection: non compulsory and redundancy selection: compulsory.