Fixed term contracts are those that have a pre-defined duration and therefore an agreement of when they will end. Despite this however you must follow a process for the dismissal of an employee at the end of the contract to avoid a tribunal case; the expiry of a fixed term contract counts as dismissal for the purposes of unfair dismissal law.
You have an obligation to either renew or end the fixed term contract properly following a fair procedure. Today we will give you some key steps to ensure you handle this right and avoid a costly claim.
An employee can only make a claim of unfair (or constructive) dismissal once that have two years service however it is best practice to follow these guidelines as a matter of course regardless of duration. There are other reasons that an employee may take a case of tribunal and putting in place fair and thorough processes at all points of employment are a good way to manage the risk of claims.
Step 1: Invite the Employee to Meet with you
You must formally invite the employee to a meeting to discuss the expiry of their contract. This meeting should be documented so you can demonstrate it has happened and what was agreed as a result of the meeting. As this is a meeting that may terminate the employment the individual has the right to accompaniment by a trade union official or colleague. In this meeting you should also review and discuss any vacancies that may be available to the employee and therefore this meeting should be held in reasonable time to enable the employee to discuss these before the end of the contract. This meeting therefore should not be held on the final day of the contract.
Step 2: Identify and Communicate a Fair Reason for Dismissal
As with any termination you must have a fair reason for dismissal. Although in this case it appears to be an agreed termination (i.e. by way of the end of the contract) there must still be a fair reason for dismissal. Typically this could fall under two categories:
- Redundancy: If the employee was employed in a position that had a defined period for completion and the role will no longer exist following termination then redundancy is the reason for dismissal.
- Some Other Substantive Reason: If the employee was brought in to cover a period of absence or maternity leave and the role will be continued after they leave then redundancy does not apply (it is the role that is made redundant not the person) so you would use some other substantial reason and state what this is.
Step 3: Follow a Fair Process
Depending on the reason for dismissal you need to apply the appropriate, fair process. So, for example, if the employee is being made redundant then you should follow redundancy processes including looking at suitable alternative employment, hold meetings to discuss the redundancy and provide a right of appeal.
Even if you are dismissing on some other substantive reason it is best practice to follow a similar process. In relation to a fixed term contract, even if the employee hasn’t got two years service they are still entitled to receive information on any permanent vacancies. If this is not offered it could give rise to a claim of discrimination.
Step 4: Terminate the Contract
If there is no alternative you should confirm the decision to terminate the contract in writing. If the reason is redundancy and the employee has more than two years service you will need to pay them statutory redundancy pay.
If you have fixed term contracts in your business and want support to follow this process please get in touch. If you are a HR2day client you can be assured we will automatically prompt you when the contract is due to expire and manage the process for you.