Fixed-Term Contracts and the New Six-Month Unfair Dismissal Rule: What Every Employer Needs to Know Before January 2027

For years, fixed-term contracts have been one of the simplest ways for employers to deal with temporary staffing needs.

Whether you’re covering maternity leave, providing additional resources for a busy period, recruiting someone to deliver a specific project or bringing in short-term expertise, fixed-term contracts have offered businesses flexibility without necessarily creating the same long-term employment obligations as permanent recruitment.

Many employers have also taken comfort from the fact that, in practice, many fixed-term contracts ended before an employee had accrued the two years’ service needed to bring an ordinary unfair dismissal claim. If the project finished or the employee being covered returned to work, the contract came to an end.

That position is about to change.

From 1 January 2027, one of the most significant changes under the Employment Rights Act 2025 comes into force. Employees will only need six months’ continuous service before they gain the right to bring an ordinary unfair dismissal claim.

Whilst much of the discussion around this change has focused on probation periods and the dismissal of permanent employees, I believe many employers are overlooking another area that could become a significant source of risk: fixed-term contracts.

If your business regularly recruits temporary staff, now is the time to review how those contracts are managed.

The End of a Fixed-Term Contract Is Still a Dismissal

One of the biggest misconceptions I encounter is that a fixed-term contract “expires”.

Legally, that is not how it works.

When a fixed-term contract comes to an end and is not renewed, employment law treats this as a dismissal. It makes no difference whether the contract reaches its stated end date or whether it simply lapses without anyone saying anything. If employment ends because the contract is not renewed, the employee has been dismissed.

Historically, many employers never really had to think about this because most temporary employees had not accrued two years’ service.

From January 2027, however, a fixed-term employee covering maternity leave for twelve months, assisting with a nine-month project or providing long-term sickness cover will almost certainly have acquired unfair dismissal rights before their contract ends.

That means the expiry of the contract is no longer simply an administrative exercise. It becomes a dismissal that must be capable of standing up to scrutiny if challenged.

Simply Reaching the End Date Is Not Enough

One of the biggest misunderstandings is believing that the contract ending is, in itself, a lawful reason for dismissal.

It isn’t.

The fact that the agreed end date has arrived does not automatically make the dismissal fair.

Instead, employers must be able to demonstrate that the dismissal falls within one of the potentially fair reasons recognised by employment law and, just as importantly, that they acted reasonably in the circumstances.

In many temporary recruitment situations, the most appropriate justification is likely to be Some Other Substantial Reason (SOSR).

For example, where an employee has been recruited solely to cover another employee’s maternity leave, adoption leave or long-term sickness absence, or to complete a clearly defined project, the genuine temporary nature of the role may provide the reason for dismissal.

However, being able to rely on that argument starts long before the contract ends.

It begins with having a properly drafted contract that clearly explains why the appointment is temporary, what event will bring it to an end and ensuring that those expectations are reinforced throughout the employment relationship.

If an employee has always believed there was a realistic expectation of becoming permanent, it becomes much harder to argue that the eventual dismissal was reasonable.

Not Every Fixed-Term Contract Is a Redundancy

Another area that often confuses is redundancy. Many employers automatically assume that because a fixed-term contract has ended, the employee has been made redundant.

That is not always correct.

If someone has been employed purely to cover maternity leave and the substantive employee returns to work, the role itself has not disappeared. The business still requires one person to carry out that work, exactly as it did before.

In those circumstances, there is unlikely to be a redundancy situation.

By contrast, if an employee was recruited solely to complete a specific project, deliver a defined piece of work or support a temporary increase in workload. That work genuinely comes to an end, redundancy may be the more appropriate reason for dismissal.

Understanding the difference matters because the legal obligations are different, and getting the reason wrong can significantly increase the risk of a successful tribunal claim.

Process Will Become Increasingly Important

This is where I think many employers will need to change their mindset. Historically, when a fixed-term contract was nearing its end, many organisations confirmed the employee’s last working day and processed their leaving paperwork.

Going forward, that approach could create unnecessary risk. Instead, employers should be treating the end of a qualifying fixed-term contract in much the same way as any other dismissal.

That means meeting with the employee before the contract expires, explaining why the employment is ending, allowing them the opportunity to ask questions or make representations, considering whether there are any suitable alternative vacancies within the organisation and confirming the decision in writing.

Where appropriate, offering the employee the opportunity to appeal is also likely to be viewed favourably if an Employment Tribunal later scrutinises the decision.

None of this necessarily makes ending a genuine fixed-term contract difficult.

It simply demonstrates that the employer has acted fairly and reasonably.

The Hidden Risk Many Employers Will Miss

For me, the biggest practical issue isn’t the law itself.

It’s the number of businesses that will continue using the same fixed-term contracts and the same processes they have used for years without appreciating that the legal landscape has fundamentally changed.

Many organisations already have employees working on six, nine or twelve-month contracts.

Many have template contracts that have not been reviewed for years.

Many managers still believe that a fixed-term contract “expires.”

Those assumptions become much harder to defend once unfair dismissal protection starts after only six months.

This is particularly relevant for smaller employers who frequently recruit temporary staff to cover maternity leave, parental leave, long-term sickness absence or seasonal demand. These businesses often do not have dedicated HR teams and may not realise that their existing approach is no longer sufficient.

What Employers Should Be Doing Now

Although the changes do not take effect until January 2027, this is one area where planning really matters.

Now is the ideal time to review every fixed-term contract template you use and make sure the temporary purpose of the appointment is clearly explained. Managers should understand why the role is temporary and ensure that those expectations remain consistent throughout the employee’s employment.

You should also introduce a system for monitoring contract end dates well in advance. Leaving these decisions until the final week of employment creates unnecessary pressure and increases the likelihood that important procedural steps will be missed.

Most importantly, stop thinking about the expiry of a fixed-term contract as simply an administrative end date. From January, in many cases it will be a dismissal that requires both a fair reason and a fair process.

Final Thoughts

The reduction in the unfair dismissal qualifying period to six months is one of the most significant employment law reforms we have seen in recent years.

Whilst much of the attention has focused on probation periods and dismissing permanent employees, I believe fixed-term contracts deserve just as much attention. The flexibility they offer employers has not disappeared, but the way they need to be managed certainly has.

Businesses that review their contracts, train their managers and introduce robust processes now will be well placed for the changes ahead. Those who continue treating fixed-term contracts as something that “runs out” may find that what was once a routine administrative exercise has become an expensive Employment Tribunal claim.

If your organisation regularly uses fixed-term contracts, now is the right time to review your documentation and your processes before the law changes. A little preparation now could prevent a great deal of cost and disruption next year.