Fixed-Term Contracts – Pros and Cons

Advantages of Fixed-Term Contracts

There are some situations in which employers may find it desirable to enter into fixed term or specific purpose contracts with their employees.

The main advantage of fixed term or specific purpose contracts is that they allow for the termination of the contract once the fixed term or the specific purpose has been completed.
Where a company proposes to employ a person on such a contract the contract of employment should be tailored accordingly.

The Contract of Employment for a Fixed-Term Worker

In a fixed term contract, the date of commencement and the date of termination must be specifically mentioned.
Termination is by way of arriving at the date of termination written into the contract is excluded from the Unfair Dismissals Acts, 1977 – 2001, provided that the contract is in writing and is signed by the parties, and provided that it specifically excludes the application of the Acts.

Renewal of Fixed-Term Contracts

The Unfair Dismissals (Amendment) Act 1993 introduced an anti-abuse provision to prevent employers successively renewing fixed term contracts. Thus, it is not possible to employ someone on a succession of fixed term contracts and retain immunity from the Unfair Dismissals Acts, 1977 – 2001.
Employers therefore should be careful about renewing such contracts as anti-abuse provisions in the unfair dismissal legislation may apply to allow a claim for unfair dismissal.
The provision applies where an employee, employed under a fixed term contact, is dismissed on the expiry of the term and is then re-employed within three months under a new contract, the nature of the work being the same or similar, following which the employee is dismissed on the expiry of the term of the second contract without the term being renewed.
Employers should note that the three month break in service is not an absolute protection against an anti-abuse decision.
If the Rights Commissioner, the Employment Appeals Tribunal or the Circuit Court consider that the employer was trying to avoid liability under the legislation, the employee will retain continuity of employment (including any break in service) and the Unfair Dismissals Acts 1977 – 2001, will apply to the dismissal.
It is also important to note that the Protection of Employees (Fixed-Term) Work Act, 2003 places further limitations on the renewal of fixed-term or specified-purpose contracts.

Specific Purpose Contracts

Specific purpose contracts are useful where a person is being employed on a particular project or where a replacement is needed for someone who is absent due to illness, maternity leave or for some other reasons where the termination date is not definable in advance.
The contracts should be as specific as possible about the nature of the work to be performed and if a temporary replacement is involved, the person being replaced should be specifically mentioned.
The difficulty with these contracts is that the employee involved can only be required to work on the project in question and if they are required to engage in other work it is likely that the contract will be regarded as something other than a genuine specific purpose contract. Thus the exclusion of the Unfair Dismissals Act, 1977 – 2001 would be ineffective and an unfair dismissal claim could be taken.
You should note that the anti-abuse provision introduced by the Unfair Dismissals (Amendment) Act, 1993, outlined above, applies also to specific purpose contracts.

Use of Fixed-Term Contracts

Complaints under the Protection of Employees (Fixed Term Work) Act, 2003 continue to rise.
It is worth noting that the vast majority of these cases involved people employed in the State sector, with schools and colleges, local authorities and the HSE figuring prominently as respondents.
Indeed, it is clear from a review of the appeals heard by the Court since this Act came into operation that fixed term contracts are more frequently used in the public rather than the private sector.
It would appear that in some instances, obtaining sanction for permanent posts is sometimes outside the direct control of publicly funded employers and this, coupled with an ongoing need to replace employees on various forms of statutory leave and sick leave and career breaks, may have given rise to this trend.
Amongst other things, the legislation is designed to cap the length of time that an employee may be asked to serve under a succession of fixed term contracts.
However, an employer may argue that there is an ‘objective justification’ for offering further fixed term contracts beyond this limit and public sector employers in particular have often argued that their repeated use of such contracts is objectively justifiable in the circumstances.

Fixed Term and Specific Purpose Contracts of Employment

The Terms of Employment (Information) Acts, 1994 – 2001, obliges an employer to give to each new employee, within 2 months of the commencement of their employment, a written statement signed by the employer and containing certain specified terms and conditions of employment.
The Act does not apply where the employment is due to last for less than one month.


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