Since 1 October 2002 new regulations have given additional benefits to workers on fixed term contracts. Osborne Clarke’s Olivia Sinfield investigates.
FIXED TERM CONTRACTS – NO LONGER SUCH A GOOD IDEA?
The Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 came into force on 1st October 2002. Some commonly asked questions address the impact of these Regulations for both employees and employers:-
What is a fixed term contract?
A fixed term contract is a contract that has a predetermined start and end date. A contract for a specific purpose, such as a particular project, is not classified as a fixed term contract.
Who will the Regulations apply to?
The Regulations only apply to employees on fixed term contracts and not to other types of workers such as contractors, agency workers, or the self employed. The Regulations will apply to all employees currently employed on fixed term contracts as well as to those who sign new fixed term contracts.
How will the Regulations affect employees on fixed term contracts?
All employees employed on fixed term contracts now have the right not to suffer less favourable treatment unless that less favourable treatment can be objectively justified.
This means that an employer must offer its fixed term employees contractual rights and benefits that are, on the whole, equal to those of its permanent employees who do the same similar work and work in the same establishment.
This does not mean that fixed term employees are entitled to exactly the same pay and benefits as permanent employees. For example, where an employer provides private medical insurance as a benefit, the Regulations would entitle an employee on a fixed term contract to also benefit from that insurance scheme. However, where their contract is only for a short period of time, such as three months, the employer may be justified in providing a comparable benefit or payment in lieu of the benefit.
In other instances less favourable treatment will be permitted where it can be justified objectively. As an example, the effect of the Regulations would be to entitle an employee on a six month fixed term to the same low interest loan facility that is made available to permanent employees. However, the employer may be able to justify not providing the loan facility to the fixed term employee where the interest repayments are to be made over a period much longer than the six-month duration of the contract.
Is there anything else employers should be aware of?
Other provisions of particular interest are:-
- the Regulations abolish the ability to agree that the employee will not be entitled redundancy payment on expiry of the fixed term;
- a fixed term contract will be converted into a permanent contract upon the next renewal or extension where the employee has been employed on fixed term contract(s) for over four years. The four-year period will start to run from the date the Regulations came into force, so service of an employee on a fixed term contract before then would be disregarded.
- Where a fixed term employee believes they have been subjected to less favourable treatment they have the right to ask their employer for a written statement of reasons for that treatment;
- Employers are required to advertise their permanent vacancies in a way that the advertisement is likely to come to the attention of any fixed term employees.
- Employers should be particular wary of dismissing fixed term employees who have sought to enforce any of the rights conferred by the Regulations as such a dismissal will be automatically unfair.
