Everything You Need to Know About Fixed Term Contracts - Herd Digital

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The Complete Guide to Fixed Term Contracts

Everything you need to know about Fixed Term Contracts

If you’re considering a fixed term contract for your next employment, but you’re unsure if it’s right for you and your career, you’ve come to the right place. We’re here to give you all the information you need, before you make a decision about your future.

Fixed term contracts can be a great option for employers, giving them the flexibility they need to fill short or long-term employment needs: Whether it’s for support on a specific project or as maternity cover.

And fixed term contracts can also be a great opportunity for employees: If you don’t want to be tied down to one company, or want some variety and control over your work.

Of course there are disadvantages and advantages to fixed term contracts vs permanent employment to consider, but before we get into the details, let’s start by clarifying what a fixed term contract is.

What is a Fixed Term Contract?

A fixed term contract is a contract of employment of an individual within a business, for a specified period.

This means you are employed by a business for a specified period of time, like six months or one year. Or for the duration of a specific project.

Being employed on a fixed term contract instead of a temporary contract, will give you all the rights of an “employee”. This includes things such as holiday pay, protection against unfair dismissal, and a minimum notice period to name a few.

(You can find out more information on your employment rights as an “employee” here.)

Fixed term contracts can be a great way to expand your skill set by exploring new industries or working with a variety of clients. Additionally, contract roles are often paid a higher salary than a permanent position, due to the risks involved in being a contract worker.

How Long is a Fixed Term Contract?

A fixed term contract can vary in length depending on the needs of the business: They can be 3 months or shorter, or up to a maximum length of 4 years. 

In the digital marketing industry, businesses commonly hire employees on a fixed term contract to cover employment gaps, for maternity cover, or to support with new business acquisitions and increased workloads.

Meaning that businesses will typically hire an employee on a fixed term contract of a year or less, as they will likely opt to hire someone on a permanent contract if the business’s need is longer: Due to the extra costs of a fixed term contractor vs a permanent employee.

Can You Leave a Fixed Term Contract Early?

Yes, if you need to you can leave a fixed term contract early. Just like with a permanent contract, you have the right to end your employment when you need to. You will however, have to work a notice period. How long this notice period is will be stipulated in your contract.

If you need to leave your fixed term contract immediately without working a notice period, you can always ask the employer if they will release you from your contractual obligation. This is unlikely, as it will leave the business without a team member with no time to replace you, but there are absolutely steps you can take to negotiate your notice period.

You can also choose to terminate your contract without working your contractually obligated notice period. This is, however, something we do not advise as it opens you up to the possibility of being sued as you are in breach of your contract.

This is unlikely, as no business wants to earn a reputation for suing its ex-employees (it wouldn’t exactly help with recruitment or employee retention). But it’s still not something we would advise.

What if the Employer Terminates the Contract Early?

Similarly, the employer may choose to terminate your contract early. This can be due to any number of reasons, from the business losing a client and business, or due to a lack of funding. Whatever the reason, it’s important to remember you are protected with a notice period as well.

If you have been employed by the business for one month or more, then your employer will need to give you a minimum of a one week notice period. Your actual notice period may be longer, depending on the conditions of the contract you sign at the beginning of your employment. 

What Happens When a Fixed Term Contract Ends?

Your fixed term contract will automatically terminate when it reaches the end of your agreed period of employment. This will be the time specified at the beginning of your contract, or the conclusion of the project you have been working on.

However, you can always work with the business to renew your contract, and stay with the business longer. Obviously this relies on both parties being happy to continue with the employment, and negotiations for this are typically opened much earlier in the contract.

If the employer chooses not to renew your contract after more than a year of service, then you are entitled to a written statement detailing why they have decided not to renew your contract.

Fixed-Term Contract vs Permanent Employment

Fixed term contracts are a great alternative to typical permanent employment. There are a host of benefits to becoming a freelance or contractor that can be a huge benefit to your career, and how much you enjoy your work! 

But, it’s not all sunshine and rainbows.

There are some advantages to permanent employment that are worth considering, and deciding which is best for your career. While the list of pros and cons to fixed term contract vs permanent employment could go on forever, we’ll be concentrating on the big pros and cons.

Complete Guide to Fixed Term Contracts

Flexible Working vs. Job Security

As a fixed term contractor and freelancer you have much more flexibility in your working lifestyle. This can include:

  • Negotiating more hybrid working or flexible working hours.
  • Being exempt from certain contractual obligations that permanent employees face, such as mandatory meetings.
  • Avoid any additional responsibilities that aren’t outlined in your initial contract.
  • Choosing the roles and jobs you work.

However this greater flexibility does come at the expense of not having the same level of job security. While you can choose which jobs you want to work, that doesn’t always mean you will have that opportunity, or won’t have gaps in your employment in between these contracts.

Variety of Skills and Experience vs. Learning, Development and Career Progression

One of the big advantages of working in a series of fixed term contract roles instead of fewer long-term permanent positions, is the ability to learn new skills and work in new industries or verticals.

But conversely being in a permanent position means you will have more upskilling, learning, development and career progression opportunities.

Businesses will only invest in their employees when they are likely to see the return on their investment. And if they know that you’re only sticking around for 6 months or a year, they aren’t likely to give you the time or financial support to earn certifications or learn new skills.

Meaning in a fixed term contract position, you’ll have to be proactive with your own learning and development.

Higher Earning Potential vs. Company and Job Benefits

As a contract and freelancer you can typically earn more for your services than someone in a similar permanent position.

However, this is countered by the fact you may not have access to some of the company benefits that a permanent employee would enjoy. Although this largely depends on the contract you negotiate and sign with the employer.

These company and job benefits can include benefits such as health and dental insurance, paid holiday leave, company holidays or financial incentives, and bonuses.

Opportunities for Travel vs. Company Culture and Belonging

Another advantage as a freelancer or contractor, is the increased opportunities to travel. Contract roles typically offer more flexible and remote working, and you also have the opportunity to accept only fixed term contracts in different areas you would like to live.

For example, fixed term contracts and temporary roles are a typical form of employment that digital nomads enjoy, as they offer the flexibility to work from anywhere.

However, permanent employees have more of an opportunity to become involved in and enjoy a company’s culture. And given how important company culture is to employee motivation, innovation and all round enjoyment of their roles, it’s no surprise that contract work just isn’t right for some people, who want to be a part of a team for the long-term.

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