Fixed-Term Employment – Time to revisit

Fixed-Term Employment – Time to revisit

As an HR practitioner, I must balance legal requirements and thinking with practical approaches and the people on the receiving end.

I can't give legal advice, but I have a solid understanding of the legal requirements to consider when keeping clients safe. Here is my take on the evolution of fixed-term employment.

Fixed-term employment has long been a useful tool when there is no ongoing need for a permanent employee (an employee contracted indefinitely with no end date). So what indicates ongoing need?

An ongoing need is most likely a task or activity expected to continue, such as managing a business's finances, which becomes a job someone holds until they decide to leave, the job changes significantly, or it is removed from the organisational structure. Where there is no obvious end date and no obvious reason it will end. Often referred to as permanent employment or indefinite employment.

So, if that’s an ongoing need, where would you choose or need to use a defined end date for someone’s employment?

There are usually three scenarios that identify as an appropriate use for fixed-term employment:

1.     The activity the role undertakes is for a project where a clear beginning, middle, and end can be articulated and identified.

2.    To cover an ongoing role where the ongoing role holder is expected to be absent for a considerable period, such as maternity, adoption, parental leave, long-term sickness, etc.

3.    There is a defined set of funding that limits the maximum scope of time the role can be funded for. This, in turn, defines a clear end date. Often, funding limitations also go along with a project but not always. Many not-for-profit organisations, for example, get a grant or donation for a specific piece of work to be completed within a specific funding envelope.

These are primarily the only reasons that it is sensible to enter into fixed-term employment arrangements.

Changes are emerging that make the reason for using them important, along with a reset in employer practices that may have crept in.

What's changing?

You have no doubt seen the Employment Rights Act 2025 appearing in all sorts of places, often followed by a confused look, or quiet hope that it will not impact you. Likely. For this discussion, I will focus on specifics related to fixed-term employment.

Technical Points

Whilst not giving legal advice, but for which legal points that underpin these technicalities. I do want to highlight some technicalities related to fixed-term employment.

·         Ending a fixed-term contract is technically a dismissal; the ending of a person's employment contract (termination). The word dismissal is important as there are only 5 fair reasons for dismissal in the UK (Capability or Qualification, Conduct, Redundancy, Statutory Restriction, Some other Substantial reason). So, in the case of a fixed-term contract, it is a substantial reason for bringing employment to an end when the reason the contract was created ceases, e.g., the person returns from long-term absence for whom the role holder provided cover.

·         Unfair dismissal could be claimed by an ex-employee if the facts behind the ending of fixed-term employment are not in line with the right reasons and process.

·         Unfair dismissal claims could only be made after 24 months' service. However, with the Employment Rights Act 2025, from 1^st January 2027 unfair dismissal eligibility drops to 6 months of employment. Before the change, be aware that anyone employed from 1^st July 2026 is likely to fall within this new time frame. This will affect many employment practices. In this case, the reasons for using a fixed term and following a fair process to terminate employment.

Practical Points for employers

Automatic Expiry of a fixed-term contract is unlikely to be possible to rely upon as a fair reason, and a fair process must be followed.

Following a fair process also implies that ACAS codes and guidelines must be considered. Fair process is likely to require communication from the employer ahead of the end date to formally discuss the intended end date, alternative roles that may be possible and possibly consultation.

A fair reason (some other substantial reasons – SOSR) is likely to be limited to the points set out above: a fixed term used to cover a long-term absence of an existing employee, for a project with defined parameters, limited due to funding. Redundancy may apply in scenarios such as where the role is permanently removed from the structure; this should always be cross-checked.

In practical terms:

·         Use fixed-term contracts only in scenarios where a specific and time-limited purpose is clear (usually project, funding, absence cover).

·         Make sure contracts state the reason for the fixed-term employment and how the employment is likely to end.

·         Make sure contracts don’t say they automatically expire.

·        Make sure a basic process is carried out prior to the end date, usually several weeks before the communicated end date is indicated (the contractual notice period needs to be factored in). The basic process should reflect ACAS guidance.

·         A basic process is likely to include writing to the employee inviting them to a meeting to discuss the end of the fixed term; holding a meeting where they can bring a colleague or union rep with them; summary notes of the meeting; looking at current vacancies that may be suitable for them internally; and answering any questions, confirming process outcome in writing and giving right to appeal.

If you’re an employer, it's worth reviewing your approach to fixed-term employment in light of the Employment Rights Act changes. HR Consultants like me and Employment Lawyers are always on hand to offer templates, processes and guidance.

Darren Garland-Bonner (Chartered FCIPD)

DMGB People Solutions Ltd