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12-month fixed-term contracts can provide businesses with clarity, flexibility, and direction by clearly determining the objectives for the year ahead. These contracts typically detail the parties involved and outline what will be achieved over the next year. For businesses aiming to target specific goals, 12-month fixed-term contracts are particularly valuable, offering a clear framework to work towards those objectives within a set timeframe, without the commitment of a long-term arrangement.
However, while these contracts are often favourable, they come with various legal considerations that need to be carefully addressed. In the right circumstances, a 12-month fixed-term contract can be extremely beneficial, helping businesses achieve their goals efficiently. On the other hand, if not managed properly, these contracts can become an added burden.
Let’s take a closer look at 12-month fixed-term contracts and explore how they can impact your business.
What Is A 12-month Fixed-Term Contract?
A 12-month fixed-term contract is an agreement that spans over the course of one year, usually to complete a specific purpose. Once that period is over, the contract automatically ends unless the parties to the contract opt to renew their agreement.
In the United Kingdom, 12-month fixed-term contracts are typically a type of employment contract. However, 12-month fixed-term contracts aren’t exclusive to employment contracts. They can be used in lease agreements, membership signups, licensing agreements, service contracts, and more. For the purpose of this article, we’ll refer to 12-month fixed-term contracts in the context of employment.
Key Features of 12-Month Fixed Term Contracts
It’s not enough for a 12-month fixed-term contract to simply state the contract is for a duration of 12 months. In order to properly address the requirements of fixed-term employment, the contract will need to feature matters such as:
- Exact Start and End Dates
- Provisions for Expiration
- Terms for Renewal
- Rights and Obligations
Essentially, the terms of a 12-month fixed-term contract should be comprehensive, covering all aspects of the employment – that way, nothing is left to assumption (that’s where misunderstandings can occur).
What is Included In A Fixed-Term Employment Contract Template?
There’s no standard template for 12-month fixed-term contracts. In fact, the more your 12-month fixed-term contract is catered to your unique circumstances (or any contract for that matter) the better equipped that contract is for protecting your business.
That said, there are certain legal aspects that should be addressed in every 12-month fixed-term contract. These matters are essential for having an agreement that’s clear, concise, and hits all the right points so both parties to the contract can be in agreement from the start.
Let’s take a look at a few of these elements below.
Contract Duration
“12-month period” is not a hard concept to grasp for most people; however, that doesn’t mean you shouldn’t be specific. It’s important to have the exact start and end dates of the 12-month period on your fixed-term contract. Memories and expectations can differ – having the exact dates can make sure both parties are well prepared for the start, duration, and end of the agreement.
Role Description
Every employment contract needs to have a role description in it – a 12-month fixed-term contract is no exception. The agreement should cover what the employee’s responsibilities will be, the hours they will work, as well as their key responsibilities and rights.
Leave Entitlements
As an employer, you’re still obligated to give your fixed-term contract employees the same leave benefits as permanent employees. As such, your 12-month fixed-term contracts should reflect this obligation. Ensure your agreements cover different types of leave such as:
- Annual leave
- Personal/Carer’s leave
- Compassionate Leave
- Parental Leave
Probationary Terms
Instead of diving headfirst into a year-long commitment, many employers like to exercise the option of a ‘probation period’. Essentially, this is where an employee’s performance is assessed for a certain period to determine whether they are right for the role.
A probationary period can be included in your 12-month fixed-term contracts. The clause will need to detail how long the probationary period is for and what happens at the end of it – of course, it’s best to have a legal expert take care of this for you.
Contract Termination
When we think about a 12-month fixed-term contract, we like to imagine the contract carrying out to full term and both parties exiting the agreement satisfied with the outcomes. However, this isn’t always the case – sometimes employees need to be terminated beforehand.
It’s important to tread carefully here, as you don’t want to unfairly dismiss an employee. However, certain acts, such as illegal conduct in the workplace, can lead to an immediate dismissal. Your 12-month fixed-term contract should explicitly cover the grounds for early termination. This ensures that employees are aware of the expectations and potential consequences from the outset.
Rights and Obligations of The Parties Involved
In order to effectively carry out a 12-month fixed-term contract period, it’s important for both parties to understand their respective rights and responsibilities. Similar to other types of employment contracts, a 12-month fixed-term contract comes with specific rights and obligations for both employers and employees. However, what distinguishes this particular agreement from other types of employment contracts is its defined 12-month period.
For employees, their responsibilities involve performing their duties in accordance with the employment contract they signed. On top of this, employees also need to comply with all workplace policies and procedures. If an employee wishes to terminate their 12-month fixed-term contract earlier than the agreed-upon date, then it’s their duty to follow the resignation procedures as outlined in the 12-month fixed-term contract to let their employer know of their plans.
Employees are also entitled to their workplace rights determined by the Employment Rights Act 1996 (as well as any other relevant UK legislation). They have the right to minimum entitlements, fair wages, as well as a safe place to work that’s free from bullying or discrimination. If their 12-month fixed-term contract is ending ahead of schedule, then they have a right to be notified by their employer in accordance with the terms of the agreement.
For employers, a 12-month fixed-term contract gives them the right to expect employees to fulfil their duties and determine whether they wish to extend the contract beyond the 12-month period (if the employee is onboard). They also have the responsibility to follow the terms of the agreement, ensure employees are receiving their rights under UK workplace legislation, and manage the expiry of the 12-month fixed-term contract.
Scenarios Where A 12-Month Fixed-Term Contract Is Ideal
12-month fixed-term contracts aren’t the typical standard for workplace contracts in the UK; however, there are some scenarios where a fixed-term contract makes more sense than other types of employment placements. Some of these scenarios may include:
- Project-Based work
- Seasonal work
- Maternity or parental leave coverage
- Trial period for new roles
- Consulting services
- Short-Term programs
- Covering long-term absences
- Budget constraints
As a business owner, it’s important to properly consider the advantages and disadvantages of a 12-month fixed-term contract prior to hiring employees on a fixed-term basis.
Benefits And Advantages Of This Type Of Agreement
There are numerous advantages to 12-month fixed-term contracts for businesses, if it’s the right path for you. A few of the advantages include greater flexibility, cost management and the ability to hire specialised talent for a specific period – let’s explore these in more detail.
Flexibility
12-month fixed-term contracts allow you the flexibility and options that come with hiring people on a more ‘short-term basis’. Fixed-term contracts provide the ability to hire people on the basis of need – as an employer, this can be useful for the completion of projects, busy time periods, or even just scaling your business according to its growth needs. Additionally, 12-month fixed-term contracts give you the opportunity to properly assess an employee and build a relationship with them prior to offering them a permanent position.
Cost Management
A 12-month fixed-term contract can also be beneficial in helping you budget for new recruits. When you’re aware of how long someone will be staying and how much of the budget needs to be set aside to accommodate them, it can be a lot easier to plan your finances accordingly. This predictability means you can allocate budget and resources with confidence, ensuring that the hire fits within your financial limits without unexpected costs.
A 12-month fixed-term contract can also help you evaluate the cost-effectiveness of the role within a defined period. If the role proves valuable, you can consider renewing the contract or transitioning the employee to a permanent position. If not, the contract can naturally expire, allowing you to reallocate funds as needed.
Hire Specialised Talent For A Specific Period
Specialised talent can be difficult to find and even harder to keep. A 12-month fixed-term contract can be a great way to attract experts who don’t want to be tied down to one organisation. Moreover, as a business owner, you may only require specialised talent over a certain period or to complete certain tasks. Fixed-term contracts are a great way to hire talent without the long-haul commitment.
Limitations And Legal Challenges To Consider For Your Business
It’s important to remember that a 12-month fixed-term contract comes with limitations and challenges. As an employer, you could be losing out on retaining talent or face legal challenges when it comes to navigating the complexities of 12-month fixed-term contracts and employment law. Furthermore, employees may not find fixed-term contract periods suitable for their careers, meaning you could risk minimising the pool of candidates.
It’s necessary to be well aware of the disadvantages, assess, and manage their impact where possible.
- Unfair Dismissal Claims: If an employee is let go from their 12-month fixed-term contract ahead of time without due cause, it could warrant an unfair dismissal claim. This can lead to legal disputes and potential compensation costs.
- Misclassification of Employment: If you fail to properly address the conclusion of a 12-month fixed-term contract, the employee might be considered a permanent employee by default. This could obligate you to provide benefits associated with permanent employment, such as redundancy pay and notice periods.
- Attractiveness to Employees: Fixed-term contracts might be less appealing to candidates seeking job stability. The lack of long-term security, exclusion from certain benefits like redundancy pay, and the presence of clauses like restraint of trade can deter high-quality candidates who prefer permanent positions.
- Limited Employee Engagement and Loyalty: Employees on 12-month fixed-term contracts may feel less engaged with your business, knowing their employment has an impending end date. This could impact their productivity and overall contribution to the business.
- Increased Turnover and Recruitment Costs: An over-reliance on 12-month fixed-term contracts means a lot of employees will be coming in and out of the business. This can lead to higher recruitment and training costs, as consistently hiring and onboarding new employees will consume business resources.
- Difficulty in Knowledge Retention: Employees are a valuable part of any business. When employees on a 12-month fixed-term contract leave, they take their knowledge and skills with them, potentially causing a disruption to business activities.
- Complexity in Contract Management: The management of multiple fixed-term contracts is no simple task. It requires careful attention to contract expiration dates, renewal terms, and compliance with employment laws. Failure to manage these aspects effectively can result in legal consequences.
It’s crucial to carefully weigh these potential drawbacks against the benefits of using a 12-month fixed-term contract. Ensure the contract is clearly drafted, legally compliant, and well communicated to any fixed-term employees.
How Professional Assistance Can Help You Avoid Legal Risks
Drafting a 12-month fixed-term contract requires careful consideration to avoid potential legal pitfalls. Seeking expert legal assistance is crucial to ensure that your contract is not only clear and concise but also fully compliant with UK legal principles. A legal professional can help draft your contract in accordance with your business needs, help mitigate any potential risks, and ensure the contract is meeting all necessary legal requirements.
Sprintlaw Simplifies Your Legal Contract Creation
At Sprintlaw, you can get your 12-month fixed-term contracts drafted online and stress-free. Our team of experienced legal professionals can help ensure that your 12-month fixed-term contracts are tailored to your needs, compliant with UK laws, and clearly communicate the rights and obligations of all parties involved. With the ease of our expert support, you can confidently protect your business interests while minimising legal risks.
Get Expert Help With Your Employment Contracts
12-month fixed-term contracts can be an effective way to bring talent into your business without the need for a long-term commitment. However, these contracts come with a range of legal considerations that must be carefully managed. If not handled correctly, what starts as a great opportunity for both parties can quickly turn into a challenging situation.
To ensure your 12-month fixed-term contracts are beneficial and legally sound, it’s crucial to seek expert advice. Our legal professionals can help you determine if this approach is the right fit for your business and will draft your contracts to protect your interests and foster positive working relationships.
Need help drafting your employment contracts? Learn how our experts can provide legal support today! Reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.
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