Discover the pros and cons of fixed-term contracts with our comprehensive guide. Learn how to navigate the complexities of temporary employment.
Fixed-term contracts are different types of employment contracts. This is an employment contract where the employee has a contract that ends on a fixed date or after completing a particular project. If you are looking for information regarding this topic’s pros and cons, then you are at the right place. So, without further ado, let’s get right into it;
The quick advantages of a fixed-term contract for the employer include good-quality results, checking the employee’s abilities, cost-effectiveness, no risk regarding the project, etc.
As for the disadvantages, they include loyalty issues, training for the employee, legal risks, etc. For the employee, there are not many disadvantages, just that the work is not permanent and there is no chance for promotion.
Freelancers mostly prefer fixed-term contracts to work for a certain time. Furthermore, I will share details about the pros and cons of the fixed-term contract, but if you still have any ambiguities, you can reach out to me.
What Is A Fixed-Term Contract?
A fixed-term contract is a type of contract that has a predetermined start and end date. Employers utilize temporary contracts for assessing employee abilities or completing projects that require the utmost focus.
Employees often use this contract for gaining experience, temporary work, generating income, etc. Promotion or replacement is not possible for an employee in this contract. It is the evolution of freelancing.
Fixed-Term Contracts: Pros And Cons
Fixed-term contracts could be both advantageous and disadvantageous depending on the situation and the preference of either party. Many find it advantageous, while others identify the cons of this contract prominently. Here are some of the pros and cons of fixed-term contracts depending on the party;
1. Pros and Cons of Fixed-Term Contracts For Employers
Pros:
- Employers can use fixed-term contracts to test the abilities of individuals and assess their potential for permanent employment. The employer can get an idea about which individuals to choose and which ones to let go of based on the completion of one project.
- Employers can hire people on fixed-term contracts to complete time-boxed projects within a specific timeframe. This approach enables employers to accomplish the job while avoiding the need to pay wages to extra employees.
- Hiring workers on fixed-term contracts is cost-effective for employers. Employers can avoid promoting these employees and complete the project at a fixed cost. If the employers do not plan to hire the employees as permanent staff, they can easily let them go once the project is completed.
- Studies show that the projects done by fixed-term employees are much better in quality as compared to the ones done by permanent employees. The main reason is that the fixed-term employees are there for a fixed amount of time, they try to make an impression and do their work honestly.
- On the other hand, permanent employees tend to slack off more which leads to an imperfect final product that could even harm the company’s reputation. But, surely this is not the case for everyone, there are exceptions as well.
Cons:
- The first and most important disadvantage of a fixed-term contract is the disloyalty of the employees. It is a hard truth, but if employees on fixed-term contracts get a better opportunity, they will leave their employer’s organization for that company after the completion of the contract.
- Another disadvantage is that first, the employer has to train their newly hired employee for the project. This could be a hassle for the employer and even costly sometimes. In this scenario, the project might face delays or an increase in cost.
- It is natural for a human being to prefer the person close to them to other people. For employers, there could be discrimination between permanent employees and fixed-term employees. If it affects either one professionally, it could result in a lawsuit against the employer. So, it could be disadvantageous as well.
- A simple yet annoying disadvantage of a fixed-term contract is that it becomes very hard to find skilled candidates for a fixed-term contract. This is because most skilled people prefer permanent jobs to short-termed ones. Most candidates are fresh graduates without prior exposure looking for experience or people rejected from other places. This becomes a big hassle at times.
2. Pros and Cons of Fixed-Term Contracts For Employees
Pros
- The first and foremost benefit of a fixed-term contract is that employees can work temporarily at a company to gain experience and build up their resumes for future applications. This experience makes it easier for them to land a good job in any company.
- Another benefit could be for freelancers who are not getting any work. They can work with a company on a fixed-term contract and can earn some good money and showcase their skills as well. This could lead to recognition from the employer and more freelance work based on those recognitions.
- If a person is skilful and willing to become a permanent employee at the company, they could use the fixed-term contract to show their skills to their employer and impress them to hire them as a permanent employee. The employer could even hire you for a higher post if you are competent enough.
- Using fixed-term contracts, an employee can make different useful social networks in a short amount of time. This is because, during that time, an employee meets permanent and fixed-term ones and people from diverse backgrounds. The contract time allows them to become familiar with the employees, which could be helpful.
Cons:
- The most prominent and important disadvantage of a fixed-term contract for an employee is that the work is temporary and ends with the contract. This could mean that after the completion of a project, there is no guarantee that the work will continue or not, which means no guaranteed income.
- Another disadvantage of a fixed-term contract for an employee is that there are no promotions or increases in wages during the time of the project. This could make the employee unmotivated and even depressed. A piece of advice is that you should go for a fixed-term contract only for the experience or an upgrade in the resume.
- Discrimination between permanent and fixed-term employees could be a disadvantage as well. If you are a fixed-term employee, there could be a high chance that your employer shows favouritism towards the permanent employees. Also, there could be hard communication if you try to develop friendly relations with a permanent employee. Again, there are always exceptions, but here all the scenarios are general.
- If you have a lot of fixed-term contracts on your resume, it could show that you do not commit yourself. This could have a pretty bad impact on your next application. The employer would think multiple times before hiring you for their company. In this way, it becomes extremely hard to find permanent work.
How to Negotiate A Fixed-term Contract?
Renegotiating a fixed-term contract is only possible if there are valid grounds for negotiation and if the law applies to them. Sometimes, an employer tends to change the contract due to sudden changes in technology or demands.
Both the employer and the employee must agree upon negotiations for an employee on a fixed-term contract. If anyone of them says no to a specific point, it does not apply. It is, by law, a right of both parties.
If a person continues to work for the same employer after the fixed-term contract ends, the law considers that employee a permanent employee under that employer. The employer must treat the employee as a permanent employee, including salary and other related terms.
What Is Fixed-Term Contract Notice Period?
A notice period in a fixed-term contract is a heads-up time notice given by the employer. This notice has to be issued to the employee by the employer if the project is to be ended early and only if ending early is written there in the agreement.
The notice period’s general rules are that the employer must give the notice at least one week early if the employee has been working for at least one month. Another exception is that the employee must get a notice period based on their worked years. i.e., one week for every year the employee has worked for the company.
These notice periods are unnecessary if the employer does not want to finish the project early. Also, these become mandatory if the project is to be done early and the requirement comes from the employer himself.
Another thing to remember is that if there is no mention of the project getting done early, then the employer can not compel an employee to complete the project early because it would violate the contract. A lawsuit could be engaged against the employer.
Is a fixed-term contract permanent?
As the name suggests, the fixed-term contract is not permanent. Rather, it is a contract that stays for a fixed amount of time, and once that time is over, the contract ends, and the employee is out of the company.
An abundance of such contracts on your resume does not express well, so keep them initially just for the experience.
Can you resign from a fixed-term contract?
Resigning from a fixed-term contract depends on your agreement with the company. Resignation can be either noticed or immediate. If the agreement requires you to give notice to the company some time before the actual resignation, then you will have to abide by it because you are adhered to it by law.
If you violate anything that is in agreement, take resignation, for example, and then you will have to face the consequences as per law.
What are the reasons for a fixed-term contract?
There could be various reasons for hiring someone on a fixed-term contract. The most common reasons include heavy workload on the company, absence of an employee, or specific project completion.
All of these reasons are somehow related to any company’s projects that need to be done, but due to any reason, are left behind. This leads to staff hiring on fixed-term contracts to complete that specific project.
What are the disadvantages of a fixed-term contract?
Suppose a person is looking at this from the perspective of an employee. In that case, the disadvantages for you could include no promotion, wage increase, work after the end of the contract, discrimination, etc.
All of these are cons of fixed-term contracts for employees. They are there for both the employer and the employee, but the employees are directly affected.
Conclusion
Fixed-term contracts come in handy depending on the situation you are in. Sometimes, hiring individuals on a fixed-term contract could benefit your organisation more than permanent ones.
As for the employees, you should ensure that you are not making such contracts in your career. These could have a very bad impact on your resume. So, always keep these contracts just for the experience and keep them as low as possible to make your resume charming in the future.
As for the difference between fixed-term and permanent contracts, there is a fixed period and a fixed salary. Otherwise, both of these employees work on projects and can deliver quality work as well. As for preference, the people looking for just experience often go for fixed-term ones while others go for permanent contracts.
