Pros & Cons of FTCs (Fixed Term Contracts)

Pros & Cons of Fixed Term Contracts (FTCs)

Hiring employees under the Fixed Term Contracts (FTC) will give you greater benefits and flexibility. You can hire FTCs for a number of reasons including to cover maternity leave, to test some new technology and also so test waters of a new programme or a project.

Fixed-term employees regulations do not apply to agency workers, apprentices and work experience placements. If you hire an FTC you are still liable for all the tax obligations including the PAYE and the NI contributions. An employee who has been continuously employed on successive fixed-term contracts for four years or more will automatically become a permanent employee unless the employer can justify the renewals. There are legal implications when it comes to terminating a fixed-term contract.

FTCs can be very useful to cover short-term project or a key demand hike of a workstream but there are number of drawbacks of hiring FTCs vs Contractors,

  • Less skills and experience compared to contractors or even permanent staff.
  • FTC are more process intensive people rather than problem solvers (if you are looking to hire someone to solve your problems FTCs are not be the answer).
  • You still need to take care of the payrolls, the legals and insurance of the FTC.

If the reason for non-renewal is redundancy and the employee has 2 years continuous service, they will qualify for a statutory redundancy payment.

The only viable approach for an FTC is to cover an absent member of a staff. You should not hire an FTC to cover critical project or for a problem-solving issue as these type of individuals can lack the relevant experience compared to the contractors.

From contractor/ employee perspective, do you consider taking an FTC? You can consider an FTC if,

  • There is no other work available for your set of skills.
  • You will get a great experience on a particular project or with a specific client that they would otherwise be unable to secure.
  • You wish to benefit from any training provided. 

FTC is not a favourable proposition for contractors and it also can be a least favourable option for any type of employment. It gives a permie salary for a fixed amount of period. 

Notice period also can be much longer compared to a contract (depend on the contract though, can be very long compared to independent contractors).

Staff on FTCs will receive the same terms and conditions of service as non-fixed term staff. Contractors opting for fixed-term employment contracts are technically no longer contractors and loose the greater earning power (FTC salary is very similar to a permie salary).

Employers can offer to renew a fixed-term contract on less favourable terms but as an FTC you can negotiate or look at other options including the ending the contract early. 

Fixed term employees should receive,

  • The same pay and conditions as the permanent staff.
  • Same or equivalent benefits.
  • Information regarding any permanent vacancies within the organisation.
  • Protection against unfavourable treatment.

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