UK: Are Fixed-Term Contracts Coming To An End?

Last Updated: 15 August 2005
Article by James Libson and Joanna Blackburn

As things are generally quieter at this time of year, now may be a good opportunity to turn your attention to matters that often get overlooked, one being your fixed-term contracts. Traditionally, many employers have taken the view that fixed-term contracts are a convenient way to manage short-term or uncertain demand without any of the liabilities that attach to permanent employees. However, following the Fixed-term Employees Regulations which came into force in the UK in 2002, this is no longer the case. For employers who are considering terminating or not renewing fixed-term contracts, there are now additional considerations to bear in mind. In this month's briefing we look at the obligations that attach to fixed-term contracts and what you need to think about when these contracts are coming to an end.

What is a fixed-term contract?

A fixed-term contract is a contract that is not intended to be permanent and that is expressed to terminate either on a specific date, on the completion of a specific task or on the occurrence or non-occurrence of an event.

Discrimination against fixed-term employees

A fixed-term employee has the right not to be treated less favourably than a comparable permanent employee as regards the terms of their contract or by being subjected to any detriment by their employer. In addition, the employer is under an obligation to inform fixed-term employees of any permanent vacancies in the establishment where they work.

Examples of less favourable treatment include excluding fixed term employees from a pension, bonus or medical insurance scheme or selecting fixed-term employees for redundancy over permanent employees. An employer may be able to treat fixed-term employees less favourably than permanent staff if it can "objectively justify" the treatment. For example, an employer may be able to justify not providing a particular benefit by compensating the fixed-term employee for the loss of that benefit. This can be done by either providing an alternative benefit or making a specific payment.

Dealing with the expiry of a fixed-term contract

Whereas many employers appreciate that the early termination of a fixed-term contract could constitute a dismissal (and if the employee in question has been on a fixed-term or successive fixed-term contracts for over a year, that unfair dismissal considerations will apply), not as many know that the expiry and non-renewal of a fixed-term contract also constitutes a dismissal. Therefore, the employer will need to be able to justify the non-renewal of the contract with one of the five potentially fair reasons that apply to normal dismissals. The employer will also be required to follow a fair procedure in relation to the employee in order to successfully defend a claim for unfair dismissal, provided of course that the fixed-term employee has more than one year's continuous service.

Since October last year, applying proper procedures has become even more important for employers. The new minimum statutory dismissal procedures apply equally to the non-renewal of fixed-term contracts as to normal dismissals, and it is therefore essential that employers follow (as a minimum) the statutory three-step procedure to avoid a finding of automatic unfair dismissal against them, and an uplift in the employee's compensation. As the most common way to bring a claim for a failure to follow the statutory procedures will be as part of an unfair dismissal claim, some employers may choose not to follow these procedures in the case of an employee with less than one year's service. However, since a claim for a failure to follow the statutory procedures can also be tagged on to a number of other claims, it is advisable to ensure that the three-step procedure is followed as a matter of good practice in all cases where it applies.

The use of successive fixed-term contracts

Under the Fixed-term Employees Regulations, fixed-term employees with four or more years of continuous employment who have their contracts renewed or who are re-engaged on a new fixed-term contract are deemed to be employed on a permanent contract (unless a further fixed-term contract can be objectively justified). Only service after 10 July 2002 will count towards the calculation of the four year period and therefore, if you have long term fixed-term contracts coming up for renewal next year, or if you have renewed fixed-term contracts in the past and they extend beyond 10 July 2006, it is worth bearing this date in mind.

If, after 10 July 2006, you renew a fixed-term contract of an employee who has been on that fixed-term contract for a period of four years or more, such an employee will automatically become a permanent employee. For example, if an employee has a five-year contract from 1 August 2002 until 1 August 2007, which is immediately renewed, the employee will automatically become a permanent employee from 1 August 2007 and any provision in the second contract as to a fixed term will be invalid. An employee will also become a permanent employee where you have renewed a contract (or successive contracts) before 10 July 2006 and the term of the renewed contract extends beyond 10 July 2006. In such a case, if the employee has been employed for four years or more on 10 July 2006, the employee will automatically become a permanent employee from that date.

In order to avoid this, or to at least be prepared for the effects, now may be a good time to conduct a review of your fixed-term contracts to establish which, if any, are at risk of becoming indefinite in the near future. If you are looking to renew any contracts of long standing fixed-term employees, it may be wise to ensure that the new term does not extend beyond 10 July 2006. Equally, if long-term contracts are coming up for renewal at any time after 10 July 2006, you may choose at that point not to renew them. However, if you are planning to bring contracts to an end in this way in order to avoid them becoming permanent, do not forget to ensure that there is an acceptable reason for not renewing them, and that you follow the proper procedures.

This article is only intended as a general statement and no action should be taken in reliance on it without specific legal advice.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.