You are probably aware that significant changes to employment law are on the horizon.
But are you aware how those changes will affect your use of fixed-term contracts?
This is an area often seen as relatively low risk. That is about to change.
A fixed-term contract is a contract for a specified period of time. They are commonly used to cover maternity leave, manage an increase in workload or where funding is time limited.
The Employment Rights Act has already introduced a number of changes in April 2026, with further reforms to come. In this blog, we shed some light on what businesses, organisations and charities need to consider if you are using fixed-term contracts.
Why you should not wait until January 2027
Most employees have limited rights to claim unfair dismissal until they have two years of continuous service. From 1 January 2027, this will reduce from two years to six months.
That alone is a substantial shift. When applied to fixed-term contracts, it becomes even more significant. It is important to start reviewing your workforce well before January 2027.
Non-renewal has always been a dismissal
A point worth being clear on is this.
When a fixed-term contract ends and is not renewed, that is a dismissal in law.
What is changing is how quickly employees gain the right to challenge that dismissal.
At present, many employers are comfortable allowing a fixed-term contract to run its course without renewal, assuming there are no discrimination concerns. In most cases, the legal exposure is limited.
From January 2027, that position will become much more difficult to rely on.
Six months’ service changes the dynamic
Once an employee reaches six months’ service, they will have the right to bring an unfair dismissal claim.
In practice, this means:
- Most fixed-term contracts of any real length will fall within scope
- Non-renewal must be treated in the same way as any other dismissal
- Employers will need to show a fair reason and follow a fair process
Allowing a contract to simply expire without process will not be enough.
Notice periods still need to be considered
It is important not to overlook notice obligations and to remember that if an employee has had previous fixed-term contracts, this may count towards their length of service.
Employees are entitled to statutory notice once they have one month’s service. This is a minimum of one week, unless the contract provides for more.
Depending on how the contract is drafted:
- Notice may be required if the contract is terminated early
- It may also be relevant at the end of the fixed term
Getting this wrong can lead to a wrongful dismissal claim, regardless of unfair dismissal rights.
A longer window for claims
There is also a proposed change to extend the time limit for bringing Employment Tribunal claims.
Currently, most claims must be issued within three months less one day of dismissal, subject to ACAS Early Conciliation.
The proposal is to extend this to six months.
This is not yet in force, but if introduced it will extend the period during which employers remain exposed to claims.
Why this combination increases risk
Taken together, these changes create a very different risk profile:
- Employees gain rights much earlier, after six months
- They may have longer to bring a claim, potentially six months
For a fixed-term contract, that could mean an employee gains protection, leaves at the end of the contract and brings a claim several months later.
This creates a longer period of potential exposure than many employers are used to.
What employers should be doing now
Audit your fixed-term contracts
Identify employees who will reach six months’ service before or shortly after January 2027. Include those on extensions or rolling arrangements.
Review your approach to non-renewal
A simple confirmation of expiry is unlikely to be sufficient. You will need a clear reason and a process you can evidence.
Check your contracts
Ensure notice provisions are clear and workable, particularly where you intend contracts to end without notice.
Strengthen record-keeping
If time limits are extended, decisions may need to be justified months later. A clear audit trail will be important.
Prepare your managers
The end of a fixed-term contract is not an administrative step. It is a dismissal and needs to be handled properly.
A shift in how fixed-term contracts are used
Fixed-term contracts will continue to have a place. However, once employees reach six months’ service, they will no longer be a low risk option.
From January 2027, employers will need to approach them with the same level of care as any other dismissal.
How we can help
At Orchard Employment Law, we are already supporting clients to prepare for these changes by reviewing contracts, auditing current arrangements and helping to implement practical processes.
If you would like us to review your fixed-term contracts or sense-check your approach to non-renewals, we would be happy to help.
Contact us on 01634 564136.