From 1st January 2027, employees will only need six months’ service to gain ordinary unfair dismissal protection, rather than the current two years.
Although that date may still feel some way off, this is already a live issue for employers because anyone recruited now could have reached six months’ service by the time the change takes effect.
That means businesses should already be reviewing how they recruit, manage probation periods and use fixed term contracts because the decisions being made today could create dismissal risks from January.
Once an employee has unfair dismissal protection, an employer will usually need to show that there was a fair reason for ending their employment and that a reasonable process was followed. A fixed end date written into a contract doesn’t remove that responsibility.
This has led many employers to ask whether fixed term contracts are still worth using.
The answer is yes .… provided you’re using them for the right reasons and managing them properly.
Why are you using a fixed term contract?
This is the first question I’d be asking any client.
Far too often I see businesses using fixed term contracts because they aren’t quite sure about someone, they don’t want to commit to a permanent employee or they think it gives them an easier exit if things don’t work out.
Unfortunately, that’s never really been the purpose of a fixed term contract and it certainly isn’t where we’re heading now.
Fixed term contracts should exist because there is a genuine temporary business need.
Perhaps you’re covering maternity leave or long term sickness. Maybe you’ve secured a large project that needs extra resource for twelve months. Alternatively, you might simply need additional people during a particularly busy trading period.
Whatever the reason, be absolutely clear about it from the beginning because that reason becomes incredibly important when the contract comes to an end.
The reason the contract ends matters
One of the biggest misconceptions is that a fixed term contract simply expires and that’s the end of the employment relationship.
It isn’t quite that straightforward.
When the contract ends, you’ll still need a potentially fair reason for dismissing the employee.
In many cases, that reason will either be redundancy or Some Other Substantial Reason (SOSR).
Understanding the difference is crucial because the process you follow will be completely different.
When redundancy is likely to apply
If you’ve recruited someone to work on a specific project or to provide additional capacity during a busy period, redundancy may well be the appropriate reason for dismissal once that work genuinely comes to an end.
The business no longer requires someone to carry out that work, so you’re moving into redundancy territory.
That means you should be following a proper redundancy process, including consultation, considering suitable alternative roles and following a fair selection process where appropriate.
The fact the contract has a fixed end date doesn’t remove those obligations.
When SOSR is likely to be the better option
The position is often different if you’ve recruited someone purely to cover another employee’s absence.
For example, if you’ve employed someone to cover maternity leave, adoption leave or a long term sickness absence, the work itself hasn’t disappeared.
The original employee is simply returning.
In those circumstances, redundancy may not be the correct reason because your requirement for someone to carry out that work hasn’t reduced.
Instead, dismissal may fall under Some Other Substantial Reason (SOSR) because the specific reason for the temporary contract has naturally come to an end.
Generally speaking, the process here is lighter than a redundancy process, but it still isn’t a case of sending a letter saying the contract has expired.
You’ll still want to meet with the employee before the contract ends, explain the position, confirm the outcome in writing, make them aware of any suitable vacancies and, where appropriate, offer the right of appeal.
Don’t let the contract simply drift to an end
Before the contract expires, take a step back and review the situation.
Ask yourself whether the original reason for the fixed term contract still applies and whether anything has changed during the employee’s time with you.
For example, perhaps someone was originally recruited to cover maternity leave, but during their employment the business restructures and decides the role itself is no longer needed. In that situation, redundancy may now be the appropriate route instead.
Every fixed term contract should therefore be looked at on its own facts rather than assuming the answer will always be the same.
The biggest mistake I see
Businesses often focus on the end of the contract when the real issue started months earlier.
If you can’t clearly explain why you chose a fixed term contract in the first place, you’re already making life more difficult for yourself.
Document the business reason at the outset
Explain it to the employee
Keep reviewing whether that reason still applies
By the time the contract reaches its end, the correct route should be much clearer.
My advice
Fixed term contracts remain a valuable workforce planning tool. They’re ideal for genuine temporary requirements and they absolutely still have a place in many businesses.
What is changing is the level of care employers need to take before the contract starts and when it comes to an end.
With the six month qualifying period for unfair dismissal applying from 1st January 2027, employers need to change their approach now rather than waiting until the new year.
If you’re unsure whether the end of a fixed term contract should be treated as redundancy, SOSR or something else entirely, don’t guess. Taking professional HR advice before making a decision is usually far less expensive than defending the wrong decision afterwards.
Every situation is different and getting the reason for dismissal wrong can significantly increase your legal risk.
If you’d like me to review your fixed term contracts or help you determine the most appropriate route before a contract ends, get in touch. I’d much rather help you get it right at the planning stage than help defend it afterwards.