Fixed-term contracts in schools and colleges: When to use them, what to avoid and the potential impact of the Employment Rights Bill

Fixed-term contracts (FTCs) are a common feature in school and college staffing across the country. While they can offer flexibility, their use can lead to legal risks and employee dissatisfaction. This article outlines when FTCs are appropriate, the legal framework surrounding them, and the potential pitfalls of using them incorrectly. We will also give consideration to the impact of the Employment Rights Bill (ERB) on use of FTCs.

A fixed-term contract is one that ends:

• On a specified date.
• When a particular task or project is completed.
• Or when a specific event occurs (e.g. the return of a staff member from maternity leave).

These contracts are not meant to be used indefinitely or as a way to avoid offering permanent employment.

Schools and colleges should only use FTCs when there is a clear, objective reason, such as:

• Covering for staff on maternity leave, long-term sickness, or secondment.
• Temporary funding (e.g. externally funded initiatives).
• A short-term increase in workload.
• A specific project with a defined end date.
• Covering a vacancy during recruitment (typically no longer than two terms).

Important: FTCs should not be used to “trial” staff or delay permanent appointments without justification.

The use of FTCs is governed by the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 and the Equality Act 2010. These laws ensure that fixed-term employees are treated fairly and have access to the same rights as permanent staff.

Key rights include:

• Equal pay and benefits.
• Access to training and internal vacancies.
• Redundancy pay after two years of service.
• Automatic conversion to permanent status after four years on successive FTCs, unless objectively justified.

Using FTCs incorrectly can expose schools and colleges to several risks:

Unfair dismissal

Ending a fixed-term contract is legally considered a dismissal. If not handled properly, it can lead to claims of unfair dismissal.

Redundancy entitlements

Employees with two or more years of service may be entitled to redundancy pay unless the contract was to cover an absent employee.  This is particularly relevant for employers in the education sector when the Redundancy Modification Order may also come into play and could mean that an employee employed on a FTC may bring with them continuous service for redundancy purposes.

Automatic permanent status

After four years of successive FTCs, the employee may automatically become permanent unless the employer can objectively justify continued use of FTCs.

Discrimination claims

Treating FTC staff less favourably than permanent staff without a valid reason can result in discrimination claims.

Under the Employment Rights Bill, employees, including those on FTCs, will gain key rights from the first day of employment, including:

• Unfair dismissal protection.
• Statutory Sick Pay (SSP) eligibility.
• Day one rights to paternity leave and unpaid parental leave.

These reforms are part of a phased rollout, with unfair dismissal rights from day one expected to take effect in 2027.

The ERB introduces an “initial period of employment” (likely to be 9 months), during which a light-touch dismissal process may apply. The Secretary of State may set a lower cap on the compensatory award for employees unfairly dismissed during the statutory period. However:

• In order to use the light-touch dismissal process (and for the lower compensatory award to apply), dismissals must be based on conduct, capability, illegality, or some other substantial reason (SOSR) relating to the employee.
• Redundancy and SOSR relating to the employer (common reasons for ending FTCs) are excluded from this light-touch process and normal compensation applies.

Whilst employers may be able to follow a lighter-touch dismissal process when terminating FTCs by reason of conduct, capability, illegality or SOSR relating to the employee, in practice many FTCs are terminated due to redundancy or SOSR relating to the employer, which would mean that the FTC may not qualify for simplified dismissal, increasing the risk of unfair dismissal claims and making it more burdensome to engage employees on a short term basis.

To ensure compliance and fairness and for readiness to the changes coming as the ERB is enacted, employers in the education sector should:

• Review the FTCs that are currently in place and the reasons for the FTCs.
• Moving forward, document the reason for the FTC clearly in job adverts, interviews, and contracts.
• Avoid using FTCs for roles that are ongoing or permanent in nature.
• Monitor and review the contract regularly, especially if circumstances change.
• Treat the end of an FTC as a dismissal, following fair procedures including meetings, written notice, and consideration of redeployment.