Labour Law

Don’t forget to dismiss your temporary employee after the contract ends!

Kristel Tiits Kristel Tiits

During the summer, many companies employ temporary personnel either due to an increased workload or to replace colleagues who are on holiday. Temporary employees are usually employed under fixed-term employment contracts, and it is important to note the differences compared to contracts with indefinite term. For instance, if an employee working under a fixed-term contract continues work after the expiry of the contract and the employer does not address this, the contract will automatically become indefinite within five days.

Firstly, let’s examine in which cases a fixed-term employment contract may be concluded. This can be done in two cases, when one of the two following acceptable reasons exists:

  • The work is temporary and with a fixed term. For instance, an agricultural enterprise employs additional personnel for the duration of harvesting or a restaurant needs more waiters and waitresses for the high summer season in order to serve more customers.
  • There is a need to replace a temporarily absent employee. For instance, a temporary employee is hired to replace an employee who is on childcare leave.

A fixed-term contract may be concluded for up to five years

The law does not prescribe a minimum term for fixed-term contracts, so a contract may also be concluded for just one or two days. The maximum term for fixed-term contracts is five years. A fixed-term contract expires upon the expiry of the term, and the employer and the employee do not need to submit a cancellation application.

It is important to note, that if an employee working under a fixed-term contract continues work after the expiry of the contract term, the contract will automatically become indefinite. Except when temporary employee is dismissed within five days of the contract end date. However, if the employer wishes to continue to employ the temporary employee for indefinite period then an annex to the contract or new indefinite contract needs to be agreed and appropriate changes made in the employment register.

Probationary period also applies to temporary employees

Employees working under a fixed-term contract are also subject to a probationary period. The standard probationary period of four months applies to longer than 8 months temporary contracts similar to any indefinite employment contracts. However, if the duration of the fixed-term contract is less than eight months, the probationary period may not exceed half of the duration of the contract. For instance, if a fixed-term contract has been concluded for three months, the probationary period cannot exceed 1.5 months.

What happens when the work runs out before the end of contract?

For example, if a three-year project is completed by the end of the second year and the employer no longer needs the temporary workforce, the employer is still obliged to pay the temporary employees until the end of their contracts i.e. in this case the third year’s remuneration. Unlike employees on indefinite contracts, the fixed term employees cannot be laid off with a one-month remuneration.
To avoid this excessive expense an employer should consider other options. One option is to offer the temporary employee different kind of work for the remaining period, the risk here however is that if the work is too different the employee will not agree to continue the work. Another option for an employer is to renegotiate with the temporary employee to change the format of the contract to indefinite. Assuming there are suitable positions available to offer.

If this is not possible, the employer’s options are limited, because employer can end a fixed-term employment contract prematurely only when the employee is underperforming and not up to the task, or employees health does prevents them to continue working, they have been at work intoxicated, or has committed a theft, fraud or another act bringing about the loss of the employer’s trust in the employee (§ 88 of the Employment Contracts Act, which regulates the extraordinary cancellation of an employment contract by the employer due to reasons arising from the employee).

If a temporary employee wants to cancel a fixed-term employment contract before the term, they need to cancel the contract extraordinarily as stipulated in § 91 of the Employment Contracts Act, which regulates the extraordinary cancellation of an employment contract by the employee for reasons such as due to a material violation of obligations by the employer (considerable delay in the payment of salary or degrading treatment) or due to reasons arising from the employee’s health. This may be related to a significant deterioration of the employee’s own health or a need to start taking care of an ill family member.

As the examples above demonstrate, it is important to know all the rights and obligations arising from the Employment Contracts Act when concluding a fixed-term contract, in order to avoid finding yourself in the middle of a costly labour dispute.