Fixed-Term vs Permanent Contract
Last updated: February 2025
Quick Comparison
| Aspect | Fixed-Term Contract | Permanent Contract |
|---|---|---|
| Duration | Defined end date or completion event | Open-ended; no end date |
| Termination | Ends automatically at the specified date or event | Requires notice from either party or fair dismissal |
| Renewal risk | Becomes permanent after 4 years of continuous fixed-term contracts | No renewal considerations |
| Redundancy | Non-renewal may count as a dismissal for redundancy purposes | Standard redundancy procedures apply |
| Perception | May be seen as less secure by candidates | Generally preferred by employees seeking stability |
What Is a Fixed-Term Contract?
An employment contract with a specified end date or that terminates on completion of a particular task or project.
Key Features
- • Has a defined end date or termination event
- • Employee has the same statutory rights as permanent staff
- • Automatic permanent status after 4 years of continuous renewals
- • Protected against less favourable treatment under the Fixed-term Employees Regulations 2002
Best For
- • Maternity or long-term sickness cover
- • Specific funded projects with defined timelines
- • Seasonal work with predictable demand
What Is a Permanent Contract?
An open-ended employment contract with no fixed end date, continuing until terminated by either party giving notice.
Key Features
- • No end date; continues indefinitely
- • Terminated by notice from either party or dismissal
- • Full statutory rights including unfair dismissal after 2 years
- • Typically includes probationary period at the start
Best For
- • Core roles essential to ongoing business operations
- • Attracting talent who want job security
- • Building long-term team stability and company culture
When to Use a Fixed-Term Contract
Use a fixed-term contract when you have a genuine temporary need such as project funding, seasonal demand, or cover for an absent employee. Ensure you have an objective reason for the fixed term.
When to Use a Permanent Contract
Use a permanent contract for roles that are part of your ongoing business operations. This is the default for most UK employment and is expected by the majority of job seekers.
Which Does Your Business Need?
Default to permanent contracts unless you have a clear, objective reason for a fixed term. Remember that fixed-term employees have the right not to be treated less favourably, and repeated renewals beyond 4 years convert the contract to permanent by law.
FAQ
What happens when a fixed-term contract expires without renewal?
Under UK law, the expiry of a fixed-term contract without renewal is treated as a dismissal. If the employee has 2 or more years of service, they may have a claim for unfair dismissal or redundancy pay if the role no longer exists.
Do fixed-term employees get the same benefits as permanent staff?
Yes. Under the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002, fixed-term employees must receive comparable pay, benefits, and opportunities unless the employer can objectively justify different treatment.
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