Fixed-term contracts: What you need to know about this employment

As cross-border trade increases, drafting international trade-friendly contracts is essential.

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Whether you are setting up a new business or simply looking to expand an existing one, hiring new employees represents a key moment for employers. Not only does it enable employers to connect with fresh talent, but it also provides a platform to build an engaged workforce; one that gives the business a competitive advantage in new markets.

While there are numerous contractual relationships that employers can adopt, project-based organisation particularly Non-Profit Organisations have resorted to fixed-term or limited-term contracts in engaging employees.

A fixed-term employment contract is a contractual agreement between an employer and an employee that lasts for a specified time period.

Because fixed-term contracts have specified end dates, they do not require notice periods for termination once the contract expires, which frees employers from the risks of non-compliance.

On the other hand, indefinite contracts typically have explicit notice periods and statutory requirements on termination.

The statutory requirements are basically the fair procedures and substantive reasons relied on in terminating employees from work. Overlooking those procedures potentially places the employer at risk of suffering penalties such as court awards, for non-compliance.

Secondly, fixed-term employment contracts make it easier for employers to meet temporary hiring needs for short projects or seasonal work where demand is high. They also help cover for absent employees whose return date is unknown.

For example, they may come in handy where an employer would need someone to cover for an employee on a long-term sickness.

Lastly, with fixed-term contracts employers can experiment with new approaches or ideas without the rigidity or commitment of an indefinite contract, again while retaining the potential to offer a longer-term or even permanent arrangement if it suits both parties.

While there are many potential benefits for employers with employees on fixed-term contracts, there are also legal risks. Employers may not always be aware of the fact that the law provides employees on such contracts with more rights than they may realise in the first instance. While limited-term contracts can offer companies more flexibility in certain areas of the employment arrangement, employers have to remember that they still have to meet many legal duties in respect of employees on fixed-term contracts.

Employees on limited-term contracts have the same general employment rights as permanent employees, such as protection against discrimination and unfair labour practices. In addition, the law specifically protects them from being treated less favourably than permanent employees working for the same employer except where there is objective justification to do so.

Finally, the risk of litigation is ever present in any separation that is not mutually instigated regardless of the nature of the contractual terms. Having that in mind, employers ought to understand that fixed-term contracts are not a shield against potential suits for breach or unfair termination. During the pendency of the contract, employees on fix-term contracts have equal rights and protection under the law.

Oscar Onyango is an advocate with the Oscar & Associate Advocates.

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