Is It Good to Work in Fixed Term Contract?

Work culture and the requirements of employees and employers are changing every year. Until recently, the concept of employment was restricted to the office, 9-5 working hours, and 5-6 days a week. People want more time to focus on their personal lives and personal growth. We can now see different types of work where one does not have to adhere to traditional methods. Various working formats are being introduced and one of them is fixed-term employment.

Working long hours in the office, especially for IT employees, was tiresome and frustrating. They didn’t have time for themselves and their family. They couldn’t focus on their personal growth. One also used to face health problems, diabetes, cholesterol, high BP, etc. All of these factors contributed to rising attrition rates or IT employees leaving their jobs at an alarming rate.

But thanks to Industrial Labour Code, 2020, the fixed-term contract is now a part of The Industrial Employment (Standing Orders) Act, 1946. This means that an increasing number of people can now find work, gain experience, and apply it to future endeavors.

Now you must be intrigued to know a lot of things, so let’s start diving.

What Is a Fixed-Term Contract?

Fixed-term employment as the name suggests is a type of employment where employees are hired for a set duration. A contract takes place between the company and the concerned person where the starting date and the end date are clearly mentioned.

Contract employees, unlike permanent staff, know when they have to leave their jobs. However, the individual is not on the company’s payroll. 

After receiving legal approval in 2018, the contract of hiring employees temporarily has aided industries in a variety of ways. Companies can now hire seasonal workers on a short-term basis, and the elimination of intermediaries reduced costs and effort.

What Is the Difference Between Fixed-Term Employment and Permanent Employment?

The permanent employee is hired for a specific position within an organization rather than for a specific project. Permanent employees are required to serve the notice period until they resign or retire.

Limited-term employees, on the other hand, are hired for a specific period or project.

Fixed-term employees are entitled to all employment benefits that permanent employees are entitled to, such as a provident fund before completing five years of service. 

However, unlike permanent employees, fixed-term employees are not eligible for payment of compensation or a compensation package.

What Are the Reasons for a Fixed-Term Contract?

In industries where seasonal pattern influences the amount of available work, fixed-term employment is needed.

In some cases, it can also be used to fill temporary job openings. However, you cannot simply hire an employee on a fixed term without any valid reason. 

Below are some of the accepted reasons which you can consider before contract hire.

Maternity Cover:

If a permanent member goes on maternity leave, the company may need someone to cover for her for a few months.

Project Work:

Sometimes companies take on projects that require a special skill set that will not be required otherwise in long term.

Seasonal Work:

When a company needs more workers during peak season. This could be during the winter holidays for retail stores or during the summer holidays for hotels.

After reading the previous paragraphs, you must be wondering whether fixed-term contracts are beneficial or worthwhile. Let’s see about the pros and cons of the fixed or definite-term employment contract.

What Are the Advantages and Disadvantages of a Fixed Term Contract?

Let’s see the advantages of limited-term employment if you are an employer:

You will be working with specialized candidates:

As an employer, hiring people for a limited period on contract gives you one major plus point. You are going to work with candidates who are experts in their field.

If you are satisfied with their work, they can be hired as a permanent employee:

When there is a high demand in the market or during peak season, you can hire candidates on probation. During their probation period, you will evaluate their work and, if satisfied, they can be hired as a permanent employee.

Your project will be handled with full dedication:

Your employees on the contract will show more dedication towards work because of the advantages such contracts offer.

Now look at the benefits for you as an employee

You will be gaining valuable experience:

Working somewhere as a limited-term employee and not sticking in one place for long gives you the advantage of continuously gaining experience. And as an employee, you know how much experience matters.

In the interviews or even on the calls where HRs ask if you are searching for a job, they look at how many years of experience you have and not your talent. So this can be a bonus for your resume if in the future you look for permanent roles.

It is also possible that if your contract employer is happy with your work, s/he can offer you a permanent role right after the end of fixed-term employment.

Short term project means more money:

One of the benefits that attract many people to work as an employee is the opportunity to earn more money in a shorter period of time.

Because companies are willing to pay a good wage when hiring people for a short-term or special project.

Employers understand that they will only have to invest in them for a limited time, and the work is critical.

Fixed-term contract work allows you to be more flexible:

You can concentrate on your strengths. It means you don’t have to get involved with or be concerned about things you’re not good at or enjoy. Fixed-term employment allows you to work when and where you want.

Through fixed-term contracts, you can dip your toe into an industry or job role

As an employee on a fixed-term contract, you will gain job experience plus get familiar with the traditional and usual work culture.

As an employee on a fixed-term contract, you will gain job experience plus get familiar with the traditional and usual work culture.

Because not everyone is made for 10 hours/week work environment. Some likes to be flexible and work on their own terms and conditions.

We all know that every coin has two sides. Similarly, if contract hiring has advantages, it also has disadvantages. So, let us examine those disadvantages separately from the perspectives of employees and employers.

Disadvantages of fixed-term employment

We all know that every coin has two sides. Similarly, if contract hiring has advantages, it also has disadvantages. So, let us examine those disadvantages.

As an employer

Hiring for a fixed term can be hard to recruit:

As a manager, you may find it difficult to find suitable candidates. This is because applicants may not find a short-term contract as appealing as an indefinite or long-lasting option.

Putting together a cohesive team can be a difficult task:

It is difficult to find and maintain a good team where everyone works together and supports one another. And when keeping people on a limited period, building a cohesive team can be challenging.

It will eventually result in a significant attrition rate, which will harm the company’s bottom line.

You may have to face difficulties if want to terminate the employee before the end date of the contract:

Furthermore, if a fixed-term employee isn’t a good fit, an employer may want to end the contract early. Regrettably, if the contract is written to prohibit early termination, an employer may be required to pay the employee for the time remaining on their contract.

As an employee

You lack long-term security

Instead of having the security of a permanent position, you will spend time looking for a new one.

You may have to spend more time looking for work

You’ll have to deal with more administration, especially during the transition period, and prepare for job interviews on a regular basis.

Promotion is highly improbable

Because you will only be at one company for a limited time, you may not be able to advance as quickly as you would in a permanent position.

Recruiters may view you differently

If you spend a long time in fixed-term contract roles, recruiters may look at your CV differently. Even if you’re looking for a permanent position, they may assume you’re looking for a short-term/fixed-term contract role.

What Happens When a Fixed-Term Contract Ends?

If the fixed-term contract expires, the following events may occur:

Early dismissal

There is a chance that an employer will want to end the contract early. However, this must be specified in the contract; in such a case, a minimum notice of:

• If the employee has worked for the company for a month or more, one week is required
• When an employee has worked with an employer for more than two years, he or she is entitled to one week per year
• In the same way, employers must give at least one week’s notice to employees after they’ve worked for at least a month

Contracts must include all of this information.

Can Fixed Term Contract Be Terminated?

Fixed-term employees who continue to work for four years are automatically converted into permanent employees with all their benefits.

However, there are certain situations that can lead to the end of a contract:

• when the contract expires after a specified period; 
• when a project to which the individual was assigned concludes; or
• when the contract expires due to the occurrence of a specific event, such as the non-renewal of external funding for a post.

There is also a chance that the employer will fire the employee without giving a reason. This is referred to as unfair dismissal. 

If an unfair dismissal claim is filed, the employer must demonstrate that the action was justified.

The employee is entitled to redundancy pay if the unfair dismissal occurs after they have worked for the company for more than two years.

Why a Fixed-Term Employment Contract Is Risky in Global Hiring

Employment contract laws differ from country to country, so hiring international candidates for a set period of time can be risky. HR may unknowingly put the organization at risk when drafting international employment contracts if they are unfamiliar with the nuances of local labor regulations.

Because of these law variations, companies need to take care of certain points when hiring:

• Get proper information on the permissible duration of fixed-term contracts. For instance, fixed-term employment contracts in Germany can only be renewed three times in a two-year period. Employees with fixed-term contracts of four or more years in the United Kingdom progress from contract to permanent status.

• A fixed-term worker’s permissible employment role or job type. For example, fixed-term work contracts in France are only permitted in exceptional circumstances, such as replacing a temporarily absent employee, and must be documented.

• The country’s general labor laws include benefits, at-will worker rights, tax liabilities, dismissals, and industry-specific regulations.

Avoiding Risk When Using a Fixed-Term Employment Contract

When engaging in limited-term hiring, HR should follow some established guidelines that can provide a measure of safety if there is any doubt about local labor laws. Consider the following measures:

• Avoiding consecutive fixed-term contracts (an indefinite-term contract may be a better solution)

• Making certain that the contract is in writing and includes early termination language

• Any automatic renewal language in a fixed-term employment contract should be avoided.

• Any mention of benefits or terms typically associated with permanent employment contracts needs to be avoided.

• Having a trusted legal specialist who is knowledgeable about local employment laws review contracts

Another risk-aversion strategy is to collaborate with a global employer of record, also known as an international PEO. They hire international workers on your behalf and handle all local HR, payroll, and tax obligations.

The employer of record ensures that all contracts, including fixed-term contracts, comply with local labor laws, reducing your risk of penalties, fines, or back pay requirements.

What Terms Should Be Included in an Employment Contract?

Certain conditions may differ from one organization to the next when it comes to preparing the guideline for fixed employee contracts, but some aspects remain consistent. So, here is a detailed list of the points that any fixed-term employment contract must include:

Details that are required in all contracts:

• The employer’s and the employee’s names
• Employer’s mailing address
• An employee’s workplace
• Job designation or title, as well as job description
• Start date of employment

Pay and benefits

• Wages or salary
• Overtime (if applicable)
• Any other type of payment that the employee is eligible for 
• Method of payment and wage Calculation
• Additional advantages
• Pension plan

Type of Contract- Fixed

• Fixed-term contract duration
• If the employee is fired, there is a notice period.

Work Hours

• The number of hours worked per day.
• Various work schedules
• Overtime Staffing Definition
• Meal and rest time
• Requirements for timekeeping and attendance

Leave

• Annual leave is available.
• Conditions for requesting leave
• Sick leave and other paid time off

Disciplinary procedures

• Details on the country’s disciplinary procedures
• Conditions in which an employer may fire an employee

Definition of Grievance Handling

• The right of employees to union representation.
• The fixed-term employment contract explains each step of the grievance procedure.

Probation Period

• Purpose and definition
• Benefits that employees will get as per the fixed-term employment contract.

Evaluation of Performance

• Criteria for evaluating performance

Retirement Policy

• This part of the contract mentioned the retirement policy followed by the employer

Uniform

• Provision of uniforms for employees

CONCLUSION

Fixed-term contracts are ideal for specific tasks or projects, such as seasonal work. The contract is valid for a set period of time that is agreed upon by both the employer and the employee. When the employment contract’s expiration date arrives, it automatically expires without the need for either the employer or the employee to terminate it.

As a result, fixed-term contracts are typically used in situations where the nature of the work is limited to a specific time frame or is linked to the completion of a project.

While fixed-term employment contracts allow a company to cover for a specific period of time, they are more difficult to fill than indefinite-term contracts. This is due to the fact that they provide less long-term job security to prospective employees.

These days hiring people as a freelancer is also increasing day by day. Companies are hiring developers like React JS, Node JS, etc.

At BMT we help meet employers with their preferred talent globally and let them schedule interviews to know them better.

Contact us today and get started with your new project.