The global market has seen an influx of various working arrangements as the industry continuously changes. Fixed-Term contracts are among the many employee agreements that organizations worldwide utilize.
Fixed-term employment has its own rules and regulations for businesses to observe. This article should give you a thorough understanding of how this employee classification works and how it helps your companies tap into the global talent pool.
What is a Fixed-term Employment Contract?
A Fixed-Term employment contract is given to employees hired for a limited period. It applies to temporary, seasonal, and project workers whose employment ceases on a date predetermined and agreed with their employer. To give you a picture of various business relationships and how they are relevant for employers, below are some examples of them:
- A specialist hired for a specific campaign or project
- A substitute employee to cover workers on maternity leave, study leave, or on sabbatical
- An additional worker to help with business tasks during busy seasons
Fixed-Term employees are only expected to stay with the company or employer for the duration stated on the contract. It is vital, therefore, to specify the start and end date of the employee’s services and the scope of their responsibilities.
Hiring fixed-term employees is a strategic way for businesses to delegate operational tasks to seasoned workers outside their organization. However, there may be challenges to this kind of employee setup. It is essential first to understand how this contractual arrangement works by dissecting its features, functionalities, and distinction from any other contract.
Key Features in a Fixed-term Employment Contract
A Fixed-Term employment contract contains almost the same components as any other contract. It includes the job title and description, employee’s personal details, compensation package, company policy, etc. However, specific features separate a fixed-term arrangement from the rest. Below are some key aspects that employers must pay attention to when drafting a fixed-term contract
Work Duration and Classification
The primary feature of a fixed-term contract is the duration of employment. Employers are expected to specify when an employee’s services end. The contract must also explicitly classify the worker as a fixed-term employee.
Creating a clear scope of the job responsibilities is vital for temporary employees. It manages the tasks they are to perform during their short stay with a company. This feature justifies the necessity for a fixed-term employee as it mentions the extent of their duties for the business.
Fixed-term employees are given a fixed salary amount for the services they render. A breakdown of their remuneration should be indicated in the contract and should not be subject to change. Employees on a fixed-term status will not be included in the company payroll.
Termination and Renewal Process
A Fixed-term contract is automatically terminated on the predetermined date unless an employer wishes to avail of the employee’s services. In such cases, the contract can be renewed if both parties agree to it.
A notice period will not be necessary for a fixed-term agreement. The indication of an end date in the contract formalizes the transitory nature of the business relationship.
Employee Rights in a Fixed-term Employment
Employees in a fixed-term agreement may have limited access to their organization’s resources, but they are entitled to fundamental employee rights during their employment. Below are some entitlements that employers must be aware of to maintain a healthy business relationship with short-term employees:
- The right to favorable working conditions: Employers must provide the right tools and environment for employees to perform optimally, despite their classification. Fixed-Term employees should be treated the same as any other regular employee in the company.
- The right to a competitive remuneration package: Employees must have access to certain benefits, on top of their basic salary, that applies to their needs and tenure. For example, suppose an employer offers a transportation allowance for regular employees working on-site. In that case, a fixed-term employee expected to report to the office for work must have the same opportunity for such a benefit.
- The right to be informed on the opportunities within the organization: Temporary employees are entitled to be acknowledged if a job opening within the company matches their skills. It will benefit the employer and employee since the business relationship has already been established.
- The right to be considered a permanent employee if hired successively in a series of fixed-term positions: In some countries, a fixed-term employee is automatically converted to a regular one when hired consecutively for the same role. The required duration to be qualified as a permanent employee varies (which will be discussed in the later section), provided that there is no gap in time they have served. The employees’ repeated service necessitates a permanent position in the organization.
How does Fixed Term employment differ from other types of contract?
Now that we have thoroughly discussed fixed-term employment and how it works, it is only fitting to define this business arrangement against other contracts. Below we identify each type of contract and how they differ from a fixed-term one:
- At-will agreements: This type of employment allows employers and employees to terminate the employment relationship for any reason except an illegal one. Employers also have the freedom to change the terms of the employment, such as their benefits, job responsibilities, etc., without having to face any legal consequences. The indefinite nature of this employment agreement makes this arrangement different from a fixed-term contract since the latter prohibits any changes to the employment contract.
- Permanent contract: Permanent contracts are for employees hired on an ongoing basis. Their contracts indicate only the start date of their employment, and they are expected to stay in the company indefinitely. They are also offered more long-term benefits than fixed-term employees.
- Casual contract: These contracts are given to employees that are hired by the hour and as necessary by the employers. Like Fixed-term employment, this type of contract is short-term. However, casual employees do not have a fixed number of hours for work, nor are they guaranteed to render their services continuously.
- Contractors: Contractors are pretty similar to fixed-term employees but have more autonomy over their work schedule and style. Both types of workers are hired for a definite period and are given a fixed remuneration for their services. However, Contractors are not considered employees but rather an entity of their own.
Fixed Term employment across the world
Other countries often include a clause or section in their labor laws that define and talk about fixed-term employment. The regulations vary from each nation, but all are regulated to guide employers and protect employees from unjust practices and job insecurity.
Most countries provide rules regarding the duration of the work term. In France, the maximum period for fixed-term contracts is four months and can only be extended once. In Greece and Italy, the period of employment is up to 24 months and can be extended up to four times. Germany posits that a contract may only be renewed up to three times, and the total of service rendered must not exceed three years.
Some countries provide further instructions to improve on a fixed-term arrangement. In the United Kingdom, fixed-term employees that have been successively serving for four years can be converted into permanent employees. In India, fixed-term employees are offered the same wage and benefits as regular employees.
Renegotiating a fixed-term employment contract
Any contract, even with a fixed-term agreement, is subject to change due to various factors: a shift in the employee’s job responsibilities, a national mandate on the minimum wage requirement that alters the agreed salary, or procedural changes that necessitates an extension of the contract. In all instances, both the employer and employee will have the opportunity to renegotiate the employment contract to avoid legal complications.
It is also vital that both parties agree to the new terms and conditions of the contract and abide by the employees’ rights and laws in their respective countries. The employer or employee has the right to agree to or decline the changes. But both must reach an agreement before the contract expires.
Benefits of a Fixed-term employment contract
There are numerous advantages of fixed-term employment, which are favorable for both the employer and the employee. The following are as follows:
- It allows employers an opportunity to benefit from the expertise of seasoned employees.
- It allows the employee to gain experience and maintain connections with various businesses, allowing them versatility in performing tasks.
- A fixed-term duration allows employers to evaluate workers for a given position. It is also a chance for employees to be trained and a way for them to secure a more permanent place in the company.
- It offers coverage for the business when certain employees are on extended leave.
- The legally binding fixed-term contract encourages commitment among employees.
- It provides insights regarding the company workforce and budget.
Global Impact of Fixed-term Employment Contracts
Global hiring has provided numerous opportunities for businesses to explore the talent pool in other countries. But comes with it are the risks that one must look into when expanding their human resources.
The primary concern that a company must look into is the varying labor laws. Previously, we have discussed how different countries have various rules when hiring local workers for a fixed duration. Companies without due diligence may face legal complications when contracts are inconsistent with the labor code.
Another factor that employers must pay attention to is the resources needed to attract, hire, and onboard local employees for a fixed-term position. Even with the advent of technology, businesses must ensure that their job openings are well advertised to attract suitable candidates. Moreover, a streamlined onboarding process must also be set in place to hire new employees quickly and easily.
Tips on How to Get the Best Out of Hiring a Fixed-term Employee
The challenges mentioned in the earlier section can easily be remedied through thorough planning and strategizing. To help businesses get started with global hiring, below are some tips:
Create an assessment for each job position
Employers must consider if each opening in the company is to be offered on a fixed-term basis or an indefinite term. They must take note that each country puts a limit to the number of times that a fixed-term employee is rehired. In the same way, businesses must also consider the appropriate period that an employee is required to complete their tasks. Hiring them for a longer or a shorter period will affect your company’s operations and budget.
Meticulously draft each contract.
Written contracts for fixed-term employees must include all the features mentioned in the above section. Terms must clearly be stated, and dates must be explicitly mentioned. Employers may also add clauses to guide their workers further during their employment. However, all of these must abide by the employees’ rights and the laws that their country observes.
Hire experts to ensure compliance
Fortunately for employers, PEO services help businesses all over the world onboard employees compliantly. Hiring HR experts will help companies be ahead of the regulatory changes in each country and ensure that these are reflected in the employment contracts and agreements.
Overcome the challenges of Global Hiring with Multiplier
Hiring fixed-term employees can be a real asset to businesses. But in order to do so, employers are expected to have the right tools and expertise.
Multiplier helps your business minimize the risks of global hiring. Our team of experts ensures that the onboarding of employees is done seamlessly and compliantly, wherever they may be in the world.