According to KSH data, the share of employees aged 15-64 working on a fixed-term contract was 4.8% of the total workforce in 2022, almost half of the share from 10 years ago (8.2%). The data also shows that most employees (2.6%) signed an agreement for 6 months or more, 1% chose 3-6 months and 1.2% chose less than 3 months.

Today, fixed-term contracts are mostly used only in certain situations and for certain positions. Before we get to the bottom of this issue, let's look at what a fixed-term contract is.

What is a fixed-term employment contract?

Chapter XV, point 83 of the Labour Code regulates the legal framework of this form of employment. It states that a fixed-term employment contract may last for a maximum of 5 years, including the duration of a new fixed-term employment contract that is extended and established within 6 months of the termination of the previous fixed-term contract. It is also worth noting that the fixed-term employment contract can only be extended or re-established within six months of its termination if there is a legitimate interest on the part of the employer. The law also states that the probationary period for employment contracts of up to twelve months must be fixed on a pro-rata basis.

In the labour market, the basic rule is that when an employer and employee conclude a contract, the employment relationship is concluded for an indefinite period, unless the parties wish to derogate from this. An employment contract is said to be for a fixed term if the document specifies the beginning and end of the work, which may be a fixed date (e.g. until 31 December 2023), a fixed period (e.g. 1 year), or even the completion of a target (e.g. until the end of the final documentation for the project).

It is important to be aware that it is possible to extend or renew a contract, but that the total duration of this type of contract cannot exceed 5 years.

Fixed-term employment contracts can end in several ways. Let's look at these scenarios.

Termination

This is the basic case, once the period specified in the contract has expired or the purpose has been fulfilled, the agreement expires, it is terminated, and no action or termination is required.

Mutual agreement

It may also be the case that the contract is terminated by mutual agreement before the date set. In this case, the two parties must agree on exactly how long the employment relationship will continue and how it will be terminated.

One-sided termination

Either party can initiate termination, but it must have a good reason for doing so. The employer can request this if the company is in liquidation or bankruptcy if the employee's skills are at stake or if the employment relationship cannot be maintained for external reasons. The employee can also terminate the contract if he or she has good cause. Such a reason could be if maintaining the employment relationship would cause disproportionate harm or if it is simply not feasible to continue working, for example, because of a change in his or her living circumstances.

Immediate termination

The employer may also terminate the contract with immediate effect without giving a reason, but in this case, 12 months' absence pay or the remaining period of absence must be paid. If the immediate termination is accompanied by a reason, it must be one relating to negligence or failure to fulfill obligations. In the latter case, not only the employer but also the employee may exercise the option.

When is a fixed-term contract justified?

Fixed-term contracts are not very popular today, with candidates looking for long-term opportunities, but there are cases where it is worth considering. Typical examples are when more resources need to be brought in for a project, or to replace someone absent until maternity leave is over, for example.

When is a fixed-term contract, not a good option?

Take for example a company where the HR manager is leaving. They would like to find the most ideal manager to replace her, but the work cannot stop during this time. The company has two options: either it tries to hire someone for a fixed term in the short term or it hires an interim manager. The more senior the position, the more important the job, and the less advantageous it is to rely on the possibility of a fixed-term contract. It is a given that it is very difficult to find people for a fixed term, which means that good, professional people are almost impossible to find. Think of the damage that can be done by an incompetent manager or expert!

How long should a fixed-term contract be concluded can be problematic. As the above shows, there can be serious financial consequences if you terminate the contract, so it is worth thinking twice before you take the plunge.

What are the disadvantages of a fixed-term contract?

There are several disadvantages. From an employee's point of view, it is clear that career development is out of the equation, as we are talking about an employment contract that ends at a declared, foreseeable date. This can lead to motivation problems. The literature also mentions that employers are generally less generous to temporary workers, i.e. they offer a smaller benefits package, while temporary workers also have to struggle more with internal acceptance.

In such situations, it is more appropriate to appoint an interim manager, who comes in for a specific project or period, to manage, lead, and then close the process. Interim managers all have considerable management experience, so you can be sure that they are in good hands. In addition, the shorter the period, the more sensible the choice of interim manager: they can be in place within a week and onboard quickly, making the most of the time available. Interim workers are not exposed to the human disadvantages mentioned above, as they are already familiar with the advantages and best practices of this type of employment and are used to being "interim" - and we will of course provide them and the employer with all the help they need.

Interim Ltd will help you to quickly find the best and most efficient solution for your company. We will provide you with free advice on your options, from interim manager to fixed-term contract, and with the information you need, we will help you make the right decision.