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Make sure your employment contract is fit for purpose

Monday, August 10, 2015

As published in the Sunday Business Post, Sunday 9 August 2015


Temporary contracts give employers a lot of flexibility – but you can’t rely on them forever.  Employers in Ireland have a number of options when it comes to deciding what type of contract to put in place with an employee.  While the general thrust of Irish and European law favours permanent contracts of employment, employers are by no means limited to the traditional model alone.  Depending upon the requirements of the business, a variety of contract models are available.

  • The permanent contract of employment is easily the most common form of employment contract in Ireland. This is obviously an open-ended contract whereby the employee agrees to perform certain services for a fixed number of hours per week and the employer, in turn, agrees to remunerate the employee for the work that they do.  Perhaps the most significant point to note in relation to permanent contracts of employment is that once 52 weeks of continuous service have passed, the employee cannot be dismissed without cause.  It’s common to stipulate a probationary period so the employer can swiftly move to end the relationship if it’s obvious that the employee is not a good fit.


  • Fixed-term or fixed-purpose contracts can be utilised where the employer needs a specific service and the nature of that service doesn’t require a permanent employee. A fixed-term contract is limited to an actual period of time; a fixed-purpose contract is limited to the time it takes for the service to be performed (in other words, it isn’t clear at the outset how long the task will take).  The usual rule in relation to 52 weeks of continuous service doesn’t apply to a bona fide fixed-term contract – even if the period of employment is longer than a year, the employee won’t acquire the usual unfair dismissal rights.  However, because of the potential for abuse, the use of these types of contract is tightly regulated by law.  There is a limit on how often they can be renewed and an employer won’t be entitled to rely upon them indefinitely unless, objectively speaking, this can be jusitifed.  It’s important to note that a purported fixed-term/fixed-purpose contract that isn’t genuinely needed for a transient purpose is likely to be struck down by the courts and the employee will be deemed to have permanent status.


  • Independent contractor arrangements arise where there is no employment relationship at all. In this model, the employer needs a particular service performed but the worker does not contract to provide services exclusively and is free to provide similar services to third parties.  Generally speaking, an independent contractor will be in business on their own account and will be liable for their own taxes etc.  They will also enjoy considerable latitude as to how and when the work is done.   Again, as in the case of fixed-term/fixed-purpose contracts, the courts will not be slow to strike out a so-called independent contractor arrangement that is in reality an employment contract in disguise.  As in the case of the fixed-term model, an employer may be tempted to try to circumvent the law by characterising the relationship as that of independent contractor.  If this isn’t genuinely the case, the contrivance is likely to fail.


  • Part-time contracts are contracts where the employee works fewer hours than other employees in the same workplace. Generally speaking, part-time workers are treated in exactly the same way as permanent employees (the rule relating to 52 weeks of continuous service is the same, for example) but legislation specifically provides that employers have to afford part-time employees similar treatment to comparable permanent employees.  In other words, you can’t discriminate against a part-time employee merely because of their part-time status.


  • Finally, an employer can make use of agency workers – workers who are employed by an employment agency but provide the services to what is known as the “end user”: the de facto  Obviously an advantage of making use of agency workers is that an employer does not have to go to the time and trouble of recruiting and vetting candidates – they can simply request the services of an individual from an employment agency.  Generally speaking, it is the employment agency that is responsible for safeguarding the worker’s employment rights but one critically-important caveat is that unfair dismissals legislation deems the end user the employer, not the agency.  Therefore, an employer who retains agency workers beyond the 52-week threshold for continuous service runs the risk of the agency worker being able to assert that they are a permanent employee.  Employers need to take particular care in this regard.  In addition, legislation enacted in 2012 stipulates that employers must treat agency workers equitably with reference to permanent staff.  Agency workers are generally entitled (with some limited exceptions) to be paid a salary at the level they would have received if they had been employed by the end user directly.



Patrick Walshe