Upcoming changes will have significant implications for employers’ use of fixed-term contracts. What should they be doing now?
Removing the cap on unfair dismissal compensation will be consequential; when combined with reducing the unfair dismissal qualifying period, from two years to six months, it will be of even greater significance. With these plans, the government has pulled the pin on a grenade tossed into the workplace. The explosion is expected shortly after 1 January 2027 when both changes are due to come into effect. Employers are starting to plan for the blast, but the shock waves will travel in many directions. One under-appreciated effect will be the impact on fixed-term contracts and employers should start considering action on these now.
Employees working under fixed-term contracts in Great Britain have the same statutory employment rights as permanent employees – arguably greater, insofar as fixed-term employees have the right not to be treated less favourably than comparable permanent employees in the terms of their contracts or by being subjected to any detriment, a benefit not afforded to permanent staff in comparison to fixed termers. This means employers can’t operate a “two tier” system, with fixed-term employees receiving fewer benefits or otherwise being treated as inferior.
Additionally, the expiry of a fixed-term contract without renewal is treated as a dismissal for unfair dismissal and redundancy...
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