3. Renewing or ending a fixed-term contract

Ending a fixed-term contact

Fixed-term contracts will normally end automatically when they reach the agreed end date. The employer doesn’t have to give any notice.

If a contract isn’t renewed

This is considered to be a dismissal, and if the employee has 2 years’ service the employer needs to show that there’s a ‘fair’ reason for not renewing the contract (eg, if they were planning to stop doing the work the contract was for).

Workers have the right:

  • not to be unfairly dismissed after 2 years’ service - for employees who were in employment before 6 April 2012, it’s 1 year’s service
  • to a written statement of reasons for not renewing the contract - after 1 year’s service

They may be entitled to statutory redundancy payments after 2 years’ service if the reason for non-renewal is redundancy.

If the employer wants to end the contract earlier

What happens depends on the terms of the contract. If it says:

  • nothing about being ended early, the employer may be in breach of contract
  • it can be ended early, and the employer has given proper notice, the contract can be ended

Minimum notice period

Fixed-term employees have the right to a minimum notice period of:

  • 1 week if they’ve worked continuously for at least 1 month
  • 1 week for each year they’ve worked, if they’ve worked continuously for 2 years or more

These are the minimum periods. The contract may specify a longer notice period.

If an employer ends a contract without giving the proper notice, the employee may be able to claim breach of contract.

Working longer than the contract’s end date

If an employee continues working past the end of a contract without it being formally renewed, there’s an ‘implied agreement’ by the employer that the end date has changed.

The employer still needs to give proper notice if they want to dismiss the worker.

Example If a contract was for 1 month but the employee actually worked for 3 months, they’d still be entitled to the minimum notice period (1 week).

The limit on renewing a fixed-term contract

Any employee on fixed-term contracts for 4 or more years will automatically become a permanent employee, unless the employer can show there is a good business reason not to do so.

However, an employer and unions (or a staff association) may make a collective agreement that removes the automatic right to become a permanent employee in these circumstances.

Renewing a fixed-term contract on less favourable terms

If an employer wants to do this, the employee can negotiate with them to reach an agreement.

If the contract ends and they have been unable to reach an agreement, the employee may be able to claim unfair dismissal.

Ending the contract early

Employees must hand in their notice 1 week in advance if they’ve worked for an employer for a month or more. The contract may state that they need to give more notice.

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