Employment Rights Act 2025 – impact on fixed-term contracts

Tyler Ross, Solicitor

1st July 2026 marked a key date in employment law: anyone hired on or before then will have six months’ continuous service by 1st January 2027 and will gain ordinary unfair dismissal protection as soon as the reduced qualifying period takes effect. It’s also important for employers to note that where they immediately dismiss an employee, their statutory notice entitlement is tagged on to their dismissal date. This means that even employees who have been employed for 5 months and 3 weeks and are dismissed on or after 24th December 2026 could also be caught by the reduced qualifying period.

Employers are increasingly asking what the shorter qualifying period means for employees on fixed-term contracts. This concern arises from the fact that the non-renewal of a fixed-term contract is treated as a dismissal for unfair dismissal purposes, even where the employee knew the role was temporary.

It is common for fixed-term contracts to run for six months or more. Once a fixed-term employee reaches six months’ service, an employer will need to have a potentially fair reason for not renewing the contract and follow a fair process. In practice, for fixed-term employees the fair reasons are often redundancy or some other substantial reason (“SOSR”).

SOSR

An employer is most likely to rely upon SOSR when a fixed-term contract was entered into for a specific reason, such as extended-family leave or a temporary project. The SOSR in this case will be that the need for the fixed-term employee no longer exists.

Employers should make it abundantly clear to a fixed-term employee from the outset that the role is intended to be temporary. It is important that an employer can demonstrate, at the end of the term, that the underlying reason for the appointment has come to an end, such as an employee returning from maternity leave or the completion of a particular project.

In these circumstances, employers will still have to consider the usual principles of a fair dismissal process, such as considering if there are any suitable vacancies or consulting with the employee about ways to avoid the dismissal.

Redundancy

Redundancy arises where the work being carried out has diminished or ceased completely. It’s therefore common for redundancies to affect fixed-term employees.

However, employers will still need to follow the usual redundancy process to mitigate the risk of an unfair dismissal claim. This includes identifying an appropriate pool of employees and applying fair selection criteria. In this regard, employers should be careful not to pool only fixed-term employees. This is particularly the case where there are permanent employees carrying out the same or similar work.

Points for employers to consider

• How long does the business require the fixed-term employee? Where suitable, employers could consider issuing fixed-term contracts shorter than 6 months.
• Before appointing a fixed-term employee, has it been made clear to them that they are only required on a temporary basis? Employers should also make it clear what happens at the end of the fixed-term, for example that the contract will not be renewed or that there is potential for alternative work and whether there are any conditions that must be met for the appointment to be extended.
• Implement an appraisal process for renewals. This can help identify strong performers but also creates a paper trail for employers to point to where a fixed-term employee’s performance has not been satisfactory.
• Identify as early as possible the potentially fair reason for non-renewal and ensure you have the right process in place to show you have considered this reason in detail.
• Review your fixed-term contracts to make sure they account for the incoming changes.

At Kuits, we have a dedicated team that are supporting employers with updating contracts in anticipation of the forthcoming changes. If you require a contract review please get in touch on 0161 832 3434 or [email protected].