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Fixed-Term Contracts - An Alternative to Redundancy

Employment Law & HR
BG Purple

Note: this article was first written by our colleagues at Solve HR, before Solve HR joined Law At Work in March 2020. We have imported this...

Do all your employee's have contracts of employment? When certain types of work come to an end, some employees face redundancy. They may actually suit a fixed term position available within the company.

Are you aware a new contract of employment would then be required? If you are unsure whether this may affect you or you have not followed correct procedure contact Solve who can help from the outset.

When an employee commences work, it should be made clear by the Employer what happens when work comes to an end. If particular types of work become redundant, the employees who are involved then become at risk of layoff. They may actually have skills that could be useful to their employer and in this instance employers will be more willing to find substitute employment for some of the employees potentially facing redundancy. If this is the case, they should not jump to the conclusion that the employees in question will not be interested, just because the positions available are temporary and not permanent.

If an employee who was facing redundancy, was to show interest in a fixed term position e.g. a vacancy which will only last a few weeks or months until the project ends, the employee and employer could come to an agreement to defer the redundancy until the end of the available fixed term contract. If the employee was asked to work their notice within the new role, they would be less likely to agree to this arrangement. Payments in lieu, enhanced severance payments, retention bonuses etc., are some ways both the employee and employer could make a commercial deal to suit them both. The right to turn down an offer of a fixed-term role is reasonable on the basis it is not 'suitable alternative employment'. If an employee was to do this, the employer needs to make them aware that redundancy is anticipated if there is not another role that suits.

What happens if an employee takes a fixed term role that will end in a year? If a fixed term contract expires and is not renewed, this will be taken as dismissal. If an employee has two years continuous service, they are eligible for protection from unfair dismissal. If you are an employer and are faced with this issue, you should follow a fair termination procedure and also look at the availability of other suitable employment. The Employee may accept another fixed term contract again, especially if they have already done so in the past. Is an employee entitled to a redundancy payment when a fixed term contract ends? It is all down to the individual circumstances. If an employee who has been employed to work on a project for a fixed period, and it comes to an end, and the employer has no need for the particular skills used to complete the job, and lastly there is no alternative employment, the employee will then be eligible for statutory redundancy payment. This is a classic redundancy situation to be faced with.

If an employee covers a job while another person is absent on leave; maternity, parental etc. will they be made redundant on their return to work? This would not be classed as a redundancy. When the employee on leave returns to work there will still be a need for this work to be carried out. If an employee is faced with this situation, their employer should ask them to sign a new contract. This will state that the employment will end on the return to work of the absent employee they are providing cover for. There is no likelihood of any arguments arising over whether this is a redundancy or not if this position ends to allow the absent employee to return to work, procedure is followed correctly and the correct contracts are issued. The law shows this as dismissal for 'some other substantial reason', if a fair procedure is followed. Solve would highly encourage employers to speak with the employee when commencing a fixed term contract. This allows the awareness of what exactly will happen at the end of it, even more so if it is an alternative to being made redundant.

Should you require any help with contracts, redundancies or information on any of the above situations please get in touch.

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