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Topic: Recruitment

extension of fixed-term contract letter
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Extension of fixed-term contract letter

Extension of fixed-term contract letter

Use our letter to extend a fixed-term employee’s contract for a further fixed term on the same terms and conditions of employment. Be aware of the legal position if the fixed term and any extensions reach the four-year point.

Offer of extension

Our Extension of Fixed-term Contract Letter allows you to offer to extend a fixed-term employee’s contract for a further fixed term. It sets out how long you would like the extension to be for (and therefore when the extended fixed term will now end) and the reason for the proposed extension. It clarifies that the employee’s existing terms and conditions of employment will continue to apply, except of course for termination date, and this includes the notice provisions. It also confirms that the employee’s continuity of employment will be preserved, as legally there will have been no break in employment where the new fixed term continues immediately after the expiry of the current fixed term. Finally, it sets out that you can’t guarantee further employment at the end of the fixed-term contract extension and therefore it’s a condition of the offer that the employee agrees their employment is subject to termination on the expiry of the extended fixed term.

Legal issues

If the offer to the employee to extend is made and accepted before any notice of termination of the fixed-term contract has been given, this is treated in law as a mutual variation of the employee’s existing fixed-term contract, not as a dismissal coupled with re-employment. Thus, there will be no dismissal and the only term that will have been varied in these circumstances is the termination date of the contract. Consent to a variation of contract can, however, be either express or implied. For example, if the fixed-term employee continues to work beyond the termination date and you continue to pay them for their work, acceptance of an extension to the fixed-term contract will have been implied. That said, it’s always advisable to set out in writing that the contract is to be extended and stating the revised termination date, so that there can be no doubt as to what has been varied and agreed - and this is where our letter comes in.

Under the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002, an employee who has been engaged on a series of continuous fixed-term contracts for four years or more will automatically be entitled to have their contract treated as a permanent contract, unless you can objectively justify the employee’s continuing employment on a fixed-term basis. Where a fixed-term employee does have four or more years’ continuous service, they will be entitled to request a written statement from you confirming that their contract is now a permanent one, and to receive that statement within 21 days of their request being made. Also, an employee will accrue ordinary unfair dismissal rights if they have been employed by you for two years or more, regardless of whether this was on a fixed-term contract or a permanent contract. Therefore, you might want to take this into account before extending a fixed-term contract to, or beyond, the two-year point. 

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