Temporary contracts: Fixed term contracts vs specified purpose contracts

The two most common types of temporary contracts are fixed term contracts and specified purpose contracts. In this article we will look at what is a temporary contract and outline the difference between the two types, as well as the benefits and risk for each one.  


What are temporary contracts?


The Protection of Employees (Fixed-Term Work) Act 2003 covers all temporary employees that have a contract of employment where the end of it is determined by one of the following conditions:

• a specific time period e.g: a maternity leave or long term sick cover

• the completion of a specific task e.g: a project

• the occurrence of a specific event e.g: holiday or seasonal cover


The Protection of Employees (Fixed Term Work) Act was introduced to avoid the abuse of successive contracts indefinitely, when a permanent role could be offered instead. If your business is hiring temporary employees it is important to document the purpose of the temporary contract, for example, if it is to cover another employee on long term absence. Under the Act all temporary employees must have equal access to remuneration, conditions of work and access to vacancies in line with comparable permanent staff.


In the case of temporary employees who are employed for one or more years, it is important to note that the Unfair Dismissal Act also applies in addition to Protection of Employees (Fixed-Term Work) Act. However, the Unfair Dismissal Act can be excluded, in relation to the natural end of the temporary contract, once the following conditions are met:


• the temporary contract is in writing

• it states that the Unfair Dismissals Acts shall not apply to a dismissal only on the expiry of the contract

• it is signed by or on behalf of the employer and by the employee.


Finally if a temporary employee is with the company for 104 or more weeks of reckonable service they are entitled to statutory redundancy payment if the role is made redundant.


Once you have determined why you need a temporary employee then you need to consider which temporary contract should you use? A fixed term or specified purpose contract?


What is a fixed term contract?


A fixed term contract has a start date and an end date, so it is specific to a period of time.  The benefit of this type of contract is that there is nothing in the legislation that prevents an employer from providing a single fixed term contract for a specific duration, e.g: five years.


The risk arises when two or more successive fixed term contracts exceed an aggregate of four years. If that occurs the business must offer a contract of indefinite duration or what is commonly known as a permanent contract.  It is advisable to include a clause that allows either party to terminate the employment before its expiry date once due notice has been given as without it the temporary employee could sue for breach of contract.


The administration for this type of contract is higher when the contract is renewed as the employer must inform the employee in writing why the role is being renewed and explain why a permanent role has not been offered.


What is a specified purpose contract?


A specified purpose contract has a start date but there is no end date. It is used for a specific event or task. This type of temporary contract is both flexible and cost effective as it is the best type of temporary contract to cover long term absences such as maternity leave cover that has no clear return to work date and it is ideal for busy seasonal periods or for a project or event that has an unclear end date. As it has no end date there is no requirement to renew the contract each time and this reduces the amount of administration required.


The risk exposure for this type of contract is that the employee is hired only for the specific task, event or role they are covering in the case of an absent permanent employee. They cannot be transferred to another role or task for instance.


Which one should I use?


It all depends on your business requirement but you can download our guidelines and sample contract here


If you would like more information on temporary contracts or to discuss your requirements further please contact Helen at SFA on 01 605 1668 or at helen.quinn@sfa.ie or visit our HR and Employment Law advice section on www.sfa.ie/advice

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