Understanding contracts
Ciara McGuone, executive with the Small Firms Association, outlines what an employer needs to know when it comes to contracts of employment
The Small Firms Association (SFA) often receives queries from members seeking assistance regarding contracts of employment and identifying which contract type would best suit the needs of their business.
The three most commonly used contract types are: contracts of indefinite duration (otherwise known as permanent contracts), fixed-term contracts or specified purpose contracts.
Contracts of indefinite duration (permanent contract)
This is a contract with no specified end date. A contract of this nature will not expire and will only cease in situations such as resignation, dismissal, redundancy etc. However, when an employer gives this type of contract to an employee, the SFA would always advise that a probationary period would be included (usually of six months duration, not exceeding 11 months), which gives the employer some time to assess if the employee is a suitable candidate for the role and the right fit for the business.
Fixed-term and specified purpose contracts
The main advantage of fixed-term or specified purpose contracts is that they allow for the termination of the contract once the fixed term or the specified purpose has been completed.
Generally, a fixed-term contract ends on an agreed date and this is stated in the contract. By contrast, a specified purpose contract is used in situations where the termination date is not definable in advance and is suitable in situations where a person is employed as a replacement for someone who is absent due to illness or maternity leave.
Employers should ensure that they fully understand the rights of employees on fixed-term or specified purpose contracts as set out in Protection of Employees (Fixed Term Work) Act, 2003.
It is important to note that if an employer wishes to renew an employee’s fixed-term or specified purpose contract that they must provide the employee with a written statement, no later than the date of renewal, setting out the objective grounds justifying the renewal and the reasons why the company was unable to offer a contract of indefinite duration.
In addition, it is important that “Employers should ensure that they fully understand the rights of employees on fixedterm or specified purpose contracts as set out in Protection of Employees (Fixed Term Work) Act, 2003” employers are aware that there are some limitations on the use of fixedterm/specified purpose contracts and if an employee has been employed on two or more continuous fixed-term contracts, then the total duration of those contracts may not exceed four years. After this, the employee becomes entitled to a contract of indefinite duration unless the employer can justify a further fixed term contract being issued on objective grounds.
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