Sixth Form Colleges Association - Fixed-Term Contracts Guidance Brochure by Cleverbox UK Ltd

THE VOICE OF SIXTH FORM EDUCATION

FIXED-TERM CONTRACTS AN EMPLOYMENT GUIDE FOR SFCA MEMBERS

NOVEMBER 2023

CONTENTS INTRODUCTION................................................................................................................................... 1 WHAT IS A FIXED-TERM CONTRACT?................................................................................................. 2 WHY USE FIXED-TERM CONTRACTS?................................................................................................. 3 WHAT ARE EMPLOYEES’ RIGHTS UNDER FIXED-TERM CONTRACTS?............................................. 4 WHO IS A COMPARABLE PERMANENT EMPLOYEE?......................................................................... 4 WHAT DOES LESS FAVOURABLE TREATMENT MEAN?...................................................................... 5 WHAT IS OBJECTIVE JUSTIFICATION?................................................................................................ 6 DO FIXED-TERM EMPLOYEES HAVE TO BE NOTIFIED ABOUT PERMANENT VACANCIES?............ 6 WHEN DOES A FIXED-TERM EMPLOYEE BECOME PERMANENT?................................................... 7 ARE FIXED-TERM EMPLOYEES PROTECTED FROM DISMISSAL?....................................................... 8 ARE FIXED-TERM EMPLOYEES ENTITLED TO REDUNDANCY PAY WHEN A FIXED-TERM CONTRACT IS NOT RENEWED?............................................................ 10 CAN DISMISSAL OF A FIXED-TERM EMPLOYEE FOR REDUNDANCY BE UNFAIR?........................ 11 WHAT HAPPENS IF THE FIXED-TERM EMPLOYEE BECOMES PREGNANT DURING HER FIXED-TERM CONTRACT?........................................................................................... 12 FAQS................................................................................................................................................... 13 KEY TAKEAWAYS................................................................................................................................ 14 CONTACTS......................................................................................................................................... 15

INTRODUCTION Managing fixed-term contracts can be challenging. It is a complex area of law and on occasions, you may need further advice from the Sixth Form Colleges Association. Here are some key points: • Fixed-term contracts are contracts where it is agreed at the outset, that they are to last for a specified time or that they will end when a specific task, project or piece of work has been completed or event has occurred • Fixed-term employees have the right not to be treated less favourably than comparable permanent employees unless the employer can show there is objective justification for the difference in treatment

• Where successive fixed-term contracts are used for four years or more, the employee will become a permanent employee unless the employer can show there is a good business reason for why they should not become permanent •T he non-renewal of a fixed-term contract at the expiry of its term constitutes a dismissal

• Fixed-term employees who work continuously for the same employer for two years or more gain certain statutory rights. These include the right not to be unfairly dismissed and the right to a statutory redundancy payment if the reason for the nonrenewal of their contract is redundancy

WHAT IS A FIXED-TERM CONTRACT? Employees are on a fixed-term contract if it is agreed at the outset that the contract will terminate: • On the expiry of a specific fixed term • On the completion of a specific task or project • On the occurrence or non-occurrence of any other specific event The employment relationship comes to an end because of these conditions. Accordingly, it is the end-point, or expiry, which is the defining feature of a fixed-term contract unlike open-ended contracts. There are however different types of fixed-term contract and they need to be drafted with care. Some come within the scope of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (the Regulations) and some do not.

Types of fixed-term contract include: • Type 1 – a fixed-term contract which expires automatically, at the end of the term, without the need for notice. Such contracts fall within the definition under the Regulations. They are not that common however as the employer will have no flexibility to terminate the contract before the expiry of the fixed term • Type 2 – a fixed-term contract which contains a notice provision which allows for early termination on notice before the expiry of the fixed-term. However, if notice is not given, the contract will expire automatically at the end of the term. Such contracts fall within the definition under the Regulations. This type of contract gives the employer more flexibility as it can terminate the contract early provided the correct notice is given • Type 3 – a fixed-term contract which provides that notice must be given prior to the expiry date in order for the contract to come to an end. These fall outside the definition under the Regulations

WHY USE FIXED-TERM CONTRACTS? Fixed-term contracts are commonly used in the following circumstances: • Where someone is needed for a specific task or project, such as research • Where funding from an external source is for a fixed period; this is common in the education sector • Where cover is needed for maternity, adoption or shared parental leave • Where cover is needed for someone on sabbatical or on long-term sick leave • Where there is a seasonal or short-term need to cover additional demand or workload

WHAT ARE EMPLOYEES’ RIGHTS UNDER FIXED-TERM CONTRACTS? The Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (the Regulations) set out the details of the rights and remedies available. The Regulations provide that fixed-term employees have the right not to be treated less favourably than comparable permanent employees unless the employer can show there is objective justification for the difference in treatment. However, certain categories of employment are excluded from the Regulations and these include agency workers and apprentices. Note too that the Regulations do not apply to workers but only to employees.

Some key provisions of the Regulations: • Regulation 3 provides that a fixed-term employee has the right not to be treated less favourably by their employer than a comparable permanent employee in relation to the terms of their contract or by being subjected to any other detriment, unless the treatment is justified on objective grounds. For more details, see the relevant section on page 5 • Regulation 5 provides that if a fixed-term employee considers they have been treated less favourably than a comparable permanent employee, they have the right to request a written statement of the reasons for the less favourable treatment from their employer. The written statement must be provided within 21 days of the request • Regulation 6(3) provides that the dismissal of a fixed-term employee is automatically unfair if the reason, or principal reason, for dismissal is that they have done, or the employer believes or suspects they have done or intend to take certain action. For example, bringing proceedings against the employer under the Regulations or requesting a written statement under Regulation 5

WHO IS A COMPARABLE PERMANENT EMPLOYEE? Regulation 2 states that an employee is a comparable permanent employee in relation to the fixed-term employee if, at the time the alleged less favourable treatment took place: • Both employees were employed by the same employer and were engaged in the same or broadly similar work having regard, where relevant, to whether they had a similar level of qualification and skills and • The permanent employee worked or was based at the same establishment as the fixed-term employee or if there is no comparable permanent employee there, someone based at a different establishment (but not at an associated employer) if they satisfy the requirements above

WHAT DOES LESS FAVOURABLE TREATMENT MEAN? Regulation 3 provides that a fixed-term employee has the right not to be treated less favourably by their employer than a comparable permanent employee in relation to the terms of their contract or by being subjected to any other detriment. It is important to note however that the employer may be able to show there is objective justification for less favourable treatment. Regulation 3 also provides that a fixed-term employee must not be treated less favourably than a comparable permanent employee in relation to: • Any period of service qualification relating to any particular condition of service • The opportunity to receive training • The opportunity to secure any permanent position at the organisation Less favourable treatment can occur where a fixed-term employee is given different contractual terms to a permanent employee or where a particular benefit is provided to a permanent employee but not to a fixed-term employee, whether or not the benefit in question is contractual. Common examples of less favourable treatment in relation to terms of employment are exclusion from a pension, bonus or PHI scheme, exclusion from an enhanced redundancy pay policy, not being provided with free or subsidised gym membership or crèche facilities or being excluded from eligibility for a service-related pay increase. Other examples of less favourable treatment include failing to carry out appraisals for fixed-term employees when these are done for permanent staff or not providing the same promotion opportunities that are available for permanent staff. Depending on the circumstances, these examples may be objectively justified by the employer. In Hart and others v The Secretary of State for Education and Skills (2005) an Employment Tribunal held that four educational advisers working on fixed-term contracts were engaged in broadly similar work to another permanent adviser. Excluding them from the enhanced redundancy scheme that applied to permanent employees was not justified and they should be entitled to equal redundancy benefits if their contracts were not renewed on expiry. It is important for employers to have comprehensive reasons for any difference in treatment.

WHAT IS OBJECTIVE JUSTIFICATION? As mentioned, employers must not treat employees on fixed-term contracts less favourably than comparable permanent employees unless there is “objective justification” for that treatment. Employers will need to consider if the treatment: • Is to achieve a legitimate aim • Is necessary to achieve that aim • Is an appropriate way to achieve that aim, that is, the employer has acted proportionately Employers will therefore need to establish whether there is a legitimate reason for treating a fixed-term employee differently or less favourably. This will need to be looked at on a case-by-case basis, taking into account the needs and rights of individual employees and the need to balance those rights against business objectives. Regulation 4 provides that less favourable treatment is regarded as justified on objective grounds if the terms of the employee’s fixed-term contract, taken as a whole, (known as the “package approach”) are at least as favourable as the terms of the comparable permanent employee’s contract of employment. An example of objective justification of less favourable treatment is where the cost of offering a particular benefit is disproportionate. For example, a permanent comparable employee has a company car but this is not provided to a fixed-term employee on a three-month contract because of the high cost, and the business need for the employee to travel can be met in some other way. Another example is where a fixed-term employee, employed by a small charity on a short contract, is excluded from membership of a personal pension scheme because there is an administrative fee for joining the scheme, and the post is funded externally with no sum set aside for the fee.

DO FIXED-TERM EMPLOYEES HAVE TO BE NOTIFIED ABOUT PERMANENT VACANCIES? Yes. Regulation 3(6) provides that fixed-term employees have the right to be informed by their employer of available vacancies in the establishment where they work. Regulation 3(7) provides that the employee is “informed” only if the vacancy is contained in an advertisement which the employee has a reasonable opportunity of reading in the course of their employment, or the employee is given reasonable notification of the vacancy in some other way. Employers need to consider how and where they advertise their vacancies, for example, on their intranet, website or newsletters. Information about permanent vacancies should be provided to all staff in a similar way unless different methods of communication can be objectively justified.

WHEN DOES A FIXED-TERM EMPLOYEE BECOME PERMANENT? Regulation 8 provides that where an employee has been employed on a series of fixed-term contracts for a period of four years or more, the employee will become a permanent employee unless the continued use of a fixed-term contract can be objectively justified. However, it is possible for this provision to be varied under a collective or workforce agreement “in order to prevent abuse arising from the use of successive fixed-term contracts”. An agreement could do one or more of the following: • Increase or decrease the four-year limit on the total duration of successive fixed-term contracts before employment becomes permanent • Fix the maximum number of successive fixed-term contracts which can be issued before employment becomes permanent • Agree a list of objective reasons that would justify the renewal or successive use of a fixed-term contract If an employee considers that due to Regulation 8 they are now a permanent employee, they can request in writing from their employer a written statement confirming that their contract is no longer fixed-term or that they are now a permanent employee. The statement must be provided within 21 days. The terms of the contract remain the same following the conversion to a permanent contract unless expressly varied.

ARE FIXED-TERM EMPLOYEES PROTECTED FROM DISMISSAL? A key point to bear in mind is that the expiry of a fixed-term contract which is not renewed counts as a dismissal. The fixed-term employee will accrue statutory employment protection rights in the same way as a permanent employee who has the same length of service and who has been dismissed. Accordingly, a fixed-term employee has the right to bring an unfair dismissal claim (if they have the required length of service) just like any other employee. The employer will need to have a potentially fair reason for dismissal, will need to follow a fair procedure and will need to act within the range of reasonable responses in treating that reason as a sufficient reason for dismissal. There are five potentially fair reasons for dismissal set out in section 98 of the Employment Rights Act 1996: capability, conduct, redundancy, contravention of a statutory obligation and some other substantial reason. Employers need to establish the reason they intend to rely on in good time before the expiry of the contract and then to follow a fair procedure. In many cases, the non-renewal of a fixed-term contract will be potentially fair by reason of redundancy. In other cases, an employer may be able to rely on “some other substantial reason” as a potentially fair reason. For example, where the fixed-term employee is replacing an employee who is absent on family-related leave and the fixed-term employee is dismissed to allow the other employee to return to work and the fixed-term employee was informed at the outset that their employment would terminate on that other employee’s return to work. This is clearly not a redundancy situation as the need for that work to be done continues. There may be other potential reasons for dismissal depending on the employer’s reason for using a fixed-term contract in the first instance, or the performance or conduct of the employee concerned. Note that the ACAS Code of Practice on Disciplinary and Grievance Procedures explicitly states that it does not apply to the non-renewal of fixed-term contracts on their expiry. However, this does not negate the need for a procedure because, as mentioned above, an unfair dismissal could still be made. The adoption of a “fair” procedure is essential to the issue of reasonableness and even though the ACAS Code does not apply, its principles will be helpful for employers managing non-renewals of fixed-term contracts. It is important to remember that Regulation 6(3) provides that the dismissal of a fixed-term employee is automatically unfair if the reason or principal reason for dismissal is that they have done, or the employer believes or suspects they have done or intend to take certain action. For example, bringing proceedings against the employer under the Regulations or requesting a written statement under Regulation 5. No qualifying period of service is needed in these circumstances. Finally, fixed-term employees also have the right not to be wrongfully dismissed. For example, an employee who is dismissed before the end of a fixed-term contract may have a claim for wrongful dismissal unless the contract contains a provision for earlier termination on notice and the employer has complied with that.

ARE FIXED-TERM EMPLOYEES ENTITLED TO REDUNDANCY PAY WHEN A FIXED-TERM CONTRACT IS NOT RENEWED? It depends on the reason for dismissal. If the reason is redundancy and the fixed-term employee has two years’ service or more, they will be entitled to statutory redundancy pay. As for enhanced redundancy pay, fixed-term employees should not be excluded from enhanced contractual redundancy payment schemes without a legitimate reason. However, Regulation 4 provides that less favourable treatment is objectively justified if the employee’s terms taken as a whole, (the “package approach”) are at least as favourable as the terms of the comparable permanent employee’s. Accordingly, an employer may be able to show that the fixed-term employee received a higher rate of basic pay to compensate for the lack of access to enhanced redundancy payments. Another example where an employer may be able to justify a general exclusion from enhanced redundancy pay, is where they usually recruit fixed-term employees on single contracts for specific tasks, with no expectation of renewal. However, an employer would need to show that this was in fact their policy and be able to distinguish between those fixed-term contracts and any others that had been renewed.

CAN DISMISSAL OF A FIXED-TERM EMPLOYEE FOR REDUNDANCY BE UNFAIR? Potentially, yes. As mentioned, a fixed-term employee will accrue statutory employment protection rights in the same way as a permanent employee who has the same length of service. Accordingly, a fixedterm employee has the right to bring an unfair dismissal claim (if they have the required length of service) just like any other employee. In relation to redundancy dismissals therefore, employers will need to ensure that a fair redundancy procedure is followed otherwise there could be a potential unfair dismissal claim. Specific issues to consider include the redundancy pool, the selection criteria and whether suitable, alternative employment is available. In relation to the redundancy pool, employers have some discretion about who to include providing they act reasonably. They should include in the redundancy pool employees who carry out the same or similar roles regardless of whether or not they are fixed-term or permanent staff. The redundancy pool could also include roles that have similar or interchangeable skills. If a fixed-term employee is made redundant they will be regarded as automatically unfairly dismissed if the reason, or principal reason, they were selected was for a reason under Regulation 6(3). It is likely to be unlawful to select fixed-term employees for redundancy simply on the basis of their fixed-term status, unless their selection can be objectively justified. For example, if staff have been taken on for a specified period to complete a particular task which has then been completed.

WHAT HAPPENS IF THE FIXED-TERM EMPLOYEE BECOMES PREGNANT DURING HER FIXED-TERM CONTRACT? The key statutory rights for pregnant employees include time off for antenatal appointments, health and safety protection while pregnant, maternity leave and possibly statutory maternity pay. These rights apply in the same way to someone on a fixed-term contract as they do to someone on a permanent contract. In relation to statutory maternity pay however, an employee must have been continuously employed for at least 26 weeks ending with the Qualifying Week, which is the 15th week before the expected week of childbirth. In addition, the employee’s normal weekly earnings must not be less than the lower earnings limit, currently £123 a week. In addition, pregnancy and maternity is a “protected characteristic” under the Equality Act 2010 and pregnancy and maternity discrimination is unlawful. If a fixed-term contract comes to an end and is not renewed (which counts as a dismissal) it is important to identify the reason for dismissal. This is because under section 99 of the Employment Rights Act 1996, it is automatically unfair to dismiss a woman because she is pregnant or because of any reason linked to her pregnancy, such as pregnancy-related illness. No qualifying period of service is needed in these circumstances unlike claims for “ordinary” unfair dismissal.

FREQUENTLY ASKED QUESTIONS Do college holidays count as a “break” for the purposes of continuous service? It depends on the facts of each case. Continuity of employment is important because a number of important statutory rights require a period of continuous qualifying service. For example, an employee generally needs two years’ continuous employment to bring a claim for unfair dismissal and to be entitled to a statutory redundancy payment. Continuity of employment will be broken if there is no contract of employment in place for a complete week ending with a Saturday. However, there are exceptions and continuity of employment will be preserved during a gap where there is no contract of employment if the employee is: • Absent from work on account of a temporary cessation of work • Incapable of work because of sickness or injury • Absent from work in circumstances such that, by arrangement or custom, they are regarded as continuing in the employment of the employer for any purpose Whether or not college holidays mean that an employee is “absent from work on account of a temporary cessation of work” depends on the circumstances. For example, in Cornwall County Council v Prater (EAT 2005) the issue related to a home tutor who worked on a series of temporary assignments under several employment contracts. The intervals between each assignment did not break her continuity because these intervals were held to be due to a temporary cessation of work. What is “temporary” is for the Employment Tribunal to determine. As for arrangement or custom, the parties must intend for the contract to be regarded as continuing during the absence.

How does the Modification Order impact on length of service of employees on fixed-term contracts? The Modification Order establishes the right to redundancy payments where a series of successive contracts provide the employee with the relevant continuity of service. In relation to fixed-term contracts, there are two relevant issues to determine. Firstly, what is the reason for the fixed-term contract coming to an end? It may or may not be for redundancy. If it is, the second issue is to establish the employee’s continuous service of employment. This determines whether they are entitled to a statutory redundancy payment or not. Relevant to establishing continuity, where the fixed-term contract is for less than two years, is whether previous fixed-term contracts count towards continuity or whether there has been a break in service as referred to above. This will depend on the facts of each case.

FREQUENTLY ASKED QUESTIONS Are fixed-term employees entitled to the same pension rights or same level of sick pay as permanent staff? Although there is no national joint guidance on fixed-term contracts and colleges are able to decide the terms and conditions of those contracts based on local needs, less favourable treatment can occur where a fixed-term employee is given different contractual terms to a permanent employee. However, colleges may be able to show there is objective justification for less favourable treatment. For more details, see the relevant section on page 6.

KEY TAKEAWAYS In conclusion, the legislation relating to fixed-term contracts is complex, and managing the practical issues arising can be challenging. It is important to consider the circumstances and when it is appropriate to use a fixed-term contract and to remember the key principle that fixed-term employees have the right not to be treated less favourably than comparable permanent employees unless the employer can show there is objective justification for the difference in treatment. In addition, fixed-term employees who work continually for the same employer for two years or more gain certain statutory rights. These include the right not to be unfairly dismissed and the right to a statutory redundancy payment if the reason for the non-renewal of their contract is redundancy. Finally, the non-renewal of a fixed-term contract at the expiry of its term constitutes a dismissal and needs to be dealt with carefully.

CONTACTS The Sixth Form Colleges Association (SFCA) is the established voice of dedicated sixth form education and the hub of a national network of sixth form providers. For more information about this guide please contact: anna.paschali@sixthformcolleges.org Tel: 020 3824 0468 info@sixthformcolleges.org sixthformcolleges.org

matthew.smith@blakemorgan.co.uk Tel: 029 2068 6000 blakemorgan.co.uk

THE VOICE OF SIXTH FORM EDUCATION

@SFCA_info info@sixthformcolleges.org 020 3824 0468