Fixed Term Contracts - When Does an Employee on a Fixed Term Contract Become Permanent?

Fixed Term Contracts - When Does an Employee on a Fixed Term Contract Become Permanent?


  • Date: Monday 22nd July 2019
  • PDF: Download

This month we are looking at a question our HR consultants are regularly asked about. 

Just how long can an employer keep extending an employee on successive fixed term contracts before they become a permanent employee?  

The short answer is 4 years but as with many employment law matters there are additional points that employers need to consider.

Firstly, an employee on a fixed term contract that extends over 2 years will gain redundancy rights.  So, employers need to treat any worker on a temporary contract with continuous service of over two years the same as a permanent employee in the event of a redundancy situation.

After 4 years’ service the employee will automatically be made permanent “unless the employer has a good business reason not to do so.”

What is a “good" business reason?” 

For organisations running fixed duration projects or where a project is based on funding with an expiry date then they may argue that they are restricted from converting a fixed term employee to a permanent status.  However, the true test of “good business reason” will be decided by a tribunal judge should an employee seek to challenge their employment status.

For employers reluctant to rely on the “good business reason” argument then the alternative would be to make a collective agreement with the workforce to remove the right for fixed term employees to automatically become a permanent employee after four years.  This would require a consultation process with the individuals effected and for the agreement to then be added into all future fixed term contracts as they are issued.

Please ensure you speak to your HR consultant should you require further guidance on the collective agreement and consultation process.

Source: Gavin Parrott


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