While it’s unusual, yes, permanent employees can transition to fixed-term contracts. Both employers and employees can agree to modify employment terms whenever required. However, this change can only be made with the explicit consent of the employee. Though legally permissible, such a shift doesn’t happen frequently due to the complexities tied to continuity of service and unfair dismissal rights.
Continuity of Service: The 2-Year Rule
A significant factor to consider is continuity of service. Typically, when a permanent employee transitions to a fixed-term role, their service continuity is preserved. This continuity would only be interrupted by events such as a complete week’s break without any employment.
Once an employee completes two years of continuous service, they gain certain rights:
- The right to claim unfair dismissal.
- The entitlement to statutory redundancy pay.
- The right to written reasons for dismissal.
If an employer plans on having a break between the end of the permanent contract and the start of the fixed-term contract, it could be seen as a mere formality, especially if the employee is compensated for the break. This would likely not be viewed as a genuine gap in continuity but rather as an attempt to circumvent the rules.
In addition, if an employee is offered and accepts a new role prior to the end of the fixed term, even if there is a break, continuity will be maintained. This is known as a ‘temporary cessation of work’.
Non-Renewal of Fixed-Term Contracts
It’s crucial to note that if a fixed-term contract expires without renewal, it’s considered a dismissal under Sections 95 and 136 of the Employment Rights Act 1996. If an employee has more than two years of service at the contract’s expiry, there must be a fair reason for dismissal. The valid reasons would be misconduct, capability, redundancy, some other substantial reason (SOSR), or where continued employment would be in breach of the law.