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Fixed term agreements. employment contract icons

Fixed term agreements.

Not only are employment agreements required by law, they are also essential in laying the foundations for the employment relationship. In some cases, employers may use a fixed term agreement for certain employees. However, like many aspects of workplace relations there are conditions which must be met before employers issue a fixed term agreement.

What is a fixed term agreement?

A fixed term agreement specifies that an employee’s contract will end on a specified date or when a certain event has occurred. A fixed term employee may be needed to cover for another employee on leave, work during a peak period, or complete a particular project.

However, employers must have a genuine reason for hiring a fixed term employee and the reason must be specified in their contract. If the reason is not specified in the fixed term employment contract, the employee might be considered a permanent employee by law.

What rights and responsibilities do employees on a fixed term contract have?

Fixed term employees have the same employment rights and responsibilities as permanent employees. The only major difference is their employment will cease at the end of the fixed term agreement. However, there may be slight differences in how they receive leave entitlements.

If an employer wants to dismiss a fixed term employee before their employment period ends, they must go through the same regular process as a permanent employee. The reasons for dismissal must also be lawful, for example serious misconduct or performance issues following an appropriate process

Fixed term employees cannot make an unfair dismissal claim  if they leave because the contract term has ended. Unless the contract does not specify the reason for the fixed term agreement or the employee has worked beyond the extent of the contract.

Genuine reasons for fixed term employment.

Fixed term employment is necessary for industries like fruit picking or fishing, where seasonality influences the amount of available work. It also satisfies a temporary demand for labour or skill shortages in certain scenarios.

An employer cannot hire a fixed term employee without having a good reason. Accepted reasons for having a specified employment period are:

• To cover for another employee on parental leave. This also means the termination period can be moved forward if the employee on parental leave returns early
• When a project requires specialist skills that fall outside of the team’s abilities
• To provide enough labour for work that can only be done during certain seasons e.g. fruit picking

It is not acceptable to use a fixed term agreement as a means of a trial period (or probationary period) to test the suitability of a new employee. In regard to candidates who are applying for or holding a temporary visa, employers are not allowed to hire on a fixed term basis simply because of these reasons.

What should be in a fixed term agreement?

There are certain conditions that separate a fixed term agreement from other employment contracts.

A fixed term contract must specify when the employment period will start and end. It must also clearly explain the genuine reason why the employee is being hired on a fixed term basis.

Other conditions that must be in a fixed term agreement include:

• Whether they are hired on a full time or part time basis
• The guaranteed amount of hours
• Paid leave conditions
• Other minimum employment rights (e.g. wage, leave entitlements, and more)

For advice on fixed term agreements in the workplace, contact Employsure on 0800 675 700.

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Employsure is New Zealand's leading workplace relations specialist, working directly alongside employers to set the solid foundations for...
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