Does an employee qualify for redundancy pay even if they’re on a fixed-term contract? Matthew Whelan and Esther Smith advise.
The question:
If a three-year fixed-term contract is not renewed and the employee dismissed in the absence of other work, do they qualify for a redundancy payment?
Legal advice:
Matthew Whelan, solicitor, Speechly Bircham
The expiry and non-renewal of a fixed term contract amounts to a dismissal meaning, in the situation you describe where the employee has three years’ service, you need to have a fair reason for the dismissal and follow the appropriate process in line with unfair dismissal law. If the fair reason is redundancy (which it may well be) then the employee would be entitled to a redundancy payment and you would need to take other steps such as considering alternative employment. It may also be necessary to give notice to the employee.
You should also be careful of selecting that person for redundancy simply on the basis that their fixed-term contract has come to an end as this may be unlawful. You should consider when looking at selection whether to pool that person with other employees, including permanent employees.
As a general point, fixed term employees are protected against less favourable treatment than comparable permanent employees by reason of their fixed term status, although this is subject to the ability to objectively justify that treatment.
Matthew Whelan can be contacted at [email protected]. For further information, please visit www.speechlys.com.
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Esther Smith, partner, Thomas Eggar
Usually the potentially fair reason used on the expiry of a fixed term contract will be redundancy, as the work required to be done under the fixed term, or sometimes the funding for that work, will have ended. This reduction or cessation of a requirement for the employee to do the work for which they were employed to do, is a redundancy in law. Therefore if dismissing for this reason on the expiry of a fixed term an employer will need to consult with the employee and consider suitable alternative employment with them as an alternative to dismissal. If dismissal is the outcome then the employee will be entitled to a statutory redundancy payment.
Esther Smith is a partner in Thomas Eggar’s Employment Law Unit. For further information, please visit Thomas Eggar.
One Response
Does a fixed term contract negate redundancy
What happens if the contract has not been managed ie the employee commenced employment to cover a mat leave post and then covered a post that was being paid for by external funding and then ultimately completed a second maternity leave post. There was no distinction between the contracts.