Difference between Fixed-Term and Permanent Contracts

Making decisions on employment status for a growing business can be an overwhelming perspective. All the types of employment viz. full-time, part-time, fixed-tenure, freelancers, permanent and casual workers have a different purpose. Each type has its respective pros and cons. Brooding over all the available options can ultimately leave an employer disoriented and jumbled.

The following article explains the difference between Fixed term and Permanent contracts. This shall be of great use for the employees who are looking for job opportunities as well as the employers who are keen in hiring the right person for their firm.

Fixed Term Contracts

Fixed-term employees are the ones who have an employment contract with a company. This contract ends after a particular tenure, or on the completion of a specified task. They are not counted as fixed-term if they are a trainee or contracted through an agency. A fixed-term employee is preferred when a company requires a skilled person for the given project. Such contracts may also be offered to cover maternity or sick leave. If a fixed-term employee completes four years in the company, then the inpidual may automatically become a permanent employee.

If the fixed-term contract is taken up it can be beneficial for your career to become permanent. Sometimes an employer has a temporary period of job role for example if an employee needs to take maternity leave or there is a project which will last a few months. Fixed-term contracts are a way they can flexibly take on staff. There are many types of fixed-term contracts. The Fixed Term Employee Regulations are designed to prevent the unfavorable treatment of fixed-term employees as compared to permanent employees. But, the regulations have certain exceptions on agency workers, students or trainee. Fixed-term employees will be paid their salary and will also pay the full amount of income tax just as the permanent employees do.

Advantages of Fixed-Term Contracts

Following are some of the benefits of fixed-term contracts.

• Valuable Experience: If one is looking for a permanent role, fixed-term contracts may add value to the resume and there might be a chance of being offered a permanent position if you are doing a good job.
• More Earning: Generally companies need to hire people for short-term jobs and work on temporary projects which can earn you more than being on a permanent contract.
• Getting Interesting Works: Fixed-term contracts could provide a variety of works which you might not find on a permanent contract. 
• Flexibility: You can work on factors in which you have developed expertise, without having the pressure of moving to managerial positions. But, if you are confident enough that you can handle new roles easily in the future, then it offers you the flexibility to spend extended amounts of work time.
• Avoid Long-Term Commitment: You have time to think over and analyze the company to make a firm decision. 
• Accurate Budgeting and Resource Planning: One accurately do the budgeting of the available resources and also do the planning for the same.
• Covering Maternity Leave: It is very useful when it comes to covering maternity leave and secondments.

Disadvantages of Fixed-term Contracts:

• Limited Job Security: Including a role as fixed-term can discourage possessed talent from applying for a given position which is due to the limited job security.
• Loss of Productivity: A lot of time is inverted in training new hires for each project
• Additional Administration Burden: For extending and/or terminating fixed-term contracts additional administrations are required.
• Same Rights as Permanent Ones: Fixed-term employees are entitled to the same rights as permanent employees in the organisation.

Permanent Contracts

A permanent employee is the one who is been hired specifically for a given position in an organisation. They do not have an expiry date on their employment.

Advantages of Permanent Contracts

• Job Security and Stability: Permanent contract employees enjoy enhanced job security and stability.
• Expertise in One’s Job: Permanent employees adopt more responsibilities and grow the business as they get more and more efficient at their jobs with time through familiarity.
• Involvement in Long Term Projects: The employees get involved in long-term projects which reduce the risk of losing talent.
• Team Work: When there are more permanent employees it results in a more engaged and togetherness in the team.

Disadvantages of Permanent Contracts:

• Limited Flexibility: There is limited flexibility with your workforce as you will not be able to regularly prune and shift your talent.
• No Dismissal of Staff: If you want to dismiss a staff from your company may need to undertake a dismissal consultation process, punishment process and performance management discussions as the permanent contract does not expire automatically.
• No Expiry Date for Employees: Employees might take their jobs for granted and become indifferent as there is no expiry date on their contracts. In this case, the performance crops up. 
• Recruiting Is Expensive and time-Consuming: Hiring a fixed-term employee who already possesses the skills required for the project is much advantageous than finding and training a permanent employee.

Conclusion

It is a commonly disbelieved that as compared to permanent employees, fixed-term employees have less employment protection and the belief persists that fixed-term contracts provide greater freedom over employment terms and termination. This misunderstanding can result in significant legal liabilities, including less favourable treatment of fixed-term employees, redundancy claims and unfair dismissal. We may see a growth in fixed-term contracts as employers continue to engage employees on what is perceived as a more flexible platform. So, when making this choice, always ask yourself: what is better for you - fixed-term contract or permanent?