Advantages and disadvantages of a fixed-term employment contract

Starting a new job and your employer only offers you a fixed-term contract? What are the advantages and disadvantages of this form and what can you do if your contract is about to end?

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Chapters of the article

Employers may have various reasons for agreeing a fixed-term contract. It may be a cover for maternity leave, where employers often do not have many other options, or it may be a common HR policy where employers essentially set a somewhat longer probationary period. Alternatively, it may be a job with a clearly defined job description, after which no further labour is needed (preparation of a time-limited project, etc.).

A fixed-termemployment contract is , by its nature, clearly limited in duration. However, at the end of the contract, either a new contract or an amendment extending the original contract may be concluded with the agreement of both parties.

In the absence of any specific agreement on the duration of the employment contract, it is automatically deemed to be of indefinite duration.

Tip: We have discussed the signing of an employment contract, its formalities and options for its conclusion in one of our articles.

Three times and enough or restrictions by law

On the one hand, employers have a relatively free hand as to when and to whom to offer a fixed-term contract. On the other hand, the Labour Code wants to prevent the chaining of such contracts and thus minimise the disadvantageous position of employees as well as their precarious position. It is therefore a legal requirement that fixed-term contracts may be negotiated for a maximum of three years. However, in practice it is often for a shorter period, for example one year.

Example calculation:
The employment contract was concluded on 1 March 2016 for a fixed term until 28 February 2019. If the employer subsequently wishes to continue the employment relationship for a fixed term, it can either conclude an extension to the existing contract until 28 February 2022 at the latest, or conclude a new employment contract from 1 March 2019 until (at the most) 28 February 2022. The agreed duration can be shorter.
Thereafter, he has one more opportunity to extend for a maximum of three years. If the employer uses the maximum three-year fixed-term contract each time, then a second extension or new contract can be negotiated until 28/02/2025.

In this way, the maximum legal limit for the negotiation of a fixed term is exhausted.

However, in the same situation, if the employer always opted for a contract of one year only, the statutory limit for the fixed-term contract would expire at the end of February 2019 and the employer would then have to offer the employee an open-ended contract or terminate the employment relationship altogether.

Are you planning to sign an employment contract?

Have it reviewed by an Affordable Advocate. A properly written employment contract is especially appreciated when it comes to employment conflicts or even terminations.

Tip: If your employer negotiates an employment contract with you in violation of the 3×3 maximum period rule and you notify him during the term of the employment contract that you want to continue to be employed by him, this automatically changes your employment relationship to an open-ended one.

Termination of a fixed-term contract

Your employer does not have to give you any notice and there is no notice period. The contract ends on the agreed date. The employer can then decide to terminate the employment relationship , enter into a permanent contract, extend the fixed-term contract or enter into a new fixed-term contract according to the rules above.
If the company wants to employ you after it has exhausted its three attempts, it must offer you a permanent contract.

Tip: At first glance, it may seem confusing whether to extend an existing fixed-term contract or let it expire and enter into a new fixed-term contract. However, from the point of view of the law, this is quite a significant difference. If your employer has let the contract expire and prepared a new contract for you, they must deregister you from the National Insurance and Health Insurance payment records and reimburse you for the balance of your untaken leave. A new employment relationship is then established, so you are re-enrolled as an employee in all systems and the administrative burden is thus unnecessarily increased.

Exceptions for seasonal work

There is one exception to this rule. There are employees for whom fixed-term contracts need to be negotiated more frequently. These are usually seasonal activities that can only be carried out at certain times of the year, such as agricultural work and so on. In such justified cases, the employer may deviate from the above rules and set its own. Only if the employer has a trade union, these company rules must be agreed with the trade union.

If you are offered a fixed-term job, it is therefore a good idea to check whether your employer has taken any exception to the statutory rules. In practice, there will not be many such companies.

The restriction on the recurrence of fixed-term contracts also does not apply to agency employment. That is, where you are employed by an employment agency that places you in a specific position with a particular user of their services under a temporary assignment agreement. Employment agencies can therefore enter into fixed-term employment relationships without any further limits or conditions.

End of fixed-term contract and sick leave

If you are nearing the end of the period for which you have agreed a contract with your employer and you are on sick leave, this does not constitute a circumstance for the employer to continue the employment relationship with you. However, neither your receipt of sickness benefits nor your temporary incapacity for work ends when your contract ends. You will continue to receive sick pay until a doctor decides that you are fit to work again.

However, if your contract has already ended and you fall ill immediately afterwards, you can take advantage of what is known as a ‘cooling-off period’. This is seven calendar days from the end of your employment. If you fall ill during this period, you will still be entitled to sickness benefits.

Tip: Are you planning to lay off employees? With us, you can be sure that the notice you are about to give to an employee will comply with the Labour Code. We will inform you in advance of the consequences of this step and protect your rights as an employer. We will assess the risks and the objective of the dismissal. We will then prepare the notice or immediate termination of employment and give it to you for comments.

Fixed-term work and pregnancy or maternity

If an employee is pregnant and is about to go on maternity leave, during which her fixed-term contract will expire in, say, six months’ time, there is, on the one hand, no reason to terminate the contract early and give notice, but on the other hand, childbirth and maternity will not give the employee any protection in the sense that the contract will not be terminated at the agreed date. A fixed-term employment relationship will end at the end of the period for which it was agreed, regardless of whether the employee is currently on maternity or parental leave.

The termination of the employment relationship shall, inter alia, lead to the termination of the employee’s participation in the sickness insurance scheme from which maternity benefits are paid. However, there is a statutory protection period of 180 days from the end of the insurance period within which the entitlement to maternity pay may arise.

Advantages and disadvantages of a fixed-term contract

In certain circumstances, a fixed-term contract can be advantageous for both employees and employers, who can test whether the cooperation suits them. For the duration of the contract, the employee has the same status as any other employee with an open-ended contract (entitlement to sick pay, pension credit, etc.). If the cooperation does not suit one or the other party, the contract is simply not renewed afterwards.

For the employer, however, such a contract is always more advantageous, as he cannot normally simply terminate the employment relationship, whereas here it is entirely up to him whether to offer the employee an extension etc. after the end of the contract.

The main disadvantage for the employee is the uncertainty as to whether he or she can count on the employment relationship in the future.

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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