Decoding a Fixed Term Employment Contract

A fixed-term employment contract is a contract wherein a company or an organization hires a person for a specific period on a contractual basis. Generally, such a contract is of one year; however, it depends on the need and discretion of the company or organization. Under this contract, the payment is fixed prior and cannot be changed or altered before the expiry of the term. 

Fixed-term employees have a right to the same amount of wages and working conditions as permanent employees. At the expiry of the fixed-term employment contract, the employer needs not provide any notice. However, if the employee continues to work even after the expiry of the fixed-term employment contract, then there is an implied agreement between the employer and the employee. 

What elements must be included in a Fixed-term Employment Contract?

The only difference between a fixed-term contract and a permanent contract is the period of time. An employee hired on a fixed-term employment contract is hired for a fixed period of time and cannot be removed except on account of some misconduct. Some of the key elements that need to be included in an employment contract are-:

1. Job Title and Job Description: This includes a brief but specific description of the work one is expected to do.

2. Duration or term of employment: Duration or term of employment becomes very important in a fixed-term contract. This lays down the term for which the employee has been engaged. 

3. Hours of work: This clause lays down the work timings of the employee. 

4. Place of work: The place of work or the location where the employee is stationed is required to be mentioned. 

5. Leave and holidays: Typically, leaves and holidays, legally mandated, should be provided to the employee.

6. Wages: The amount of wages, the mode of payment, etc., should be included in the contract. 

7. Termination: Provisions that entitle both the employer and the employee to terminate the contract should be included in the contract. Termination upon expiry of the contract should also be provided. 

8. Renewal: A provision for the renewal of the contract based on mutual consent of the parties should also be included in the contract.

9. Boilerplate Clauses: Standard clauses such as jurisdiction, waiver, severability, etc., should also be included in a fixed-term contract.

Advantages of Fixed-term Employment Contract  

1. Although a person is hired for a specific period of time, he/she is entitled to equivalent benefits that a permanent employee enjoys, such as safe and secure working conditions, similar pay, or sometimes more considering the skills of the concerned person. 

2. A person hired under a fixed-term contract may be made permanent depending upon their performance.

3. It is affordable for the employer when he needs an employee for a short term. 

4. It helps get more specialized resources. 

Disadvantages of Fixed-term Employment Contract

1. There is no stability, as the employment contract is time-bound and once the contract expires, the employee loses his job. 

2. Typically, benefits such as promotion, good professional growth etc. are not available to fixed-term employees. 

3. It is not an assurance of permanent employment. 

4. For an employer, it may be more beneficial to have a talented pool of permanent resources. This will save the efforts of looking for an employee, every time the contract expires.

Conclusion

A fixed-term employment contract should be drafted in such a way so as to avoid any liabilities after its expiration. There should be no words that convey that the contract will be automatically renewed or that a more permanent role would be given to the employee. It is advisable to engage a lawyer while drawing up such a contract.