What You Need to Know About Fixed-Term Employment Contracts

For every business entity, it is important to establish an effective system of functioning and interaction between the employer and employees. It is important to note that this process begins with the proper formalization of labor relations. Labor relations play a key role in modern society and economy, as they form the basis for the joint activities of the parties. 

In this article, we will examine: 

• the main aspects of labor contracts;
• features of fixed-term labor contracts, including their advantages and disadvantages, and legal status;
• conditions for concluding and terminating fixed-term labor contracts.

Our company performs legal analysis of contracts and provides HR administration and Payroll services. 

What is a labor contract

A labor contract is an agreement between the owner of an enterprise or an authorized person and an employee. Under it, the employee undertakes to perform work defined by this agreement, and the employer undertakes to pay them wages and provide the necessary and legally stipulated working conditions. 

Types of labor contracts

There are three types of labor documents:

• ordinary labor contract;
• contract (specific type of labor contract);
• simplified labor contract (valid during martial law).

Let's consider each of these types in more detail.

An ordinary contract can be concluded with any employee in oral or written form and can be: fixed-term or indefinite-term. 

A contract is concluded with categories of employees for whom it is stipulated by a special law, in particular (Part 3, Article 21 of the Labor Code) in oral or written form and is always fixed-term. 

A simplified labor contract is valid for the period of martial law in Ukraine and can be concluded with employees under one of two conditions:

• with an employee whose monthly salary exceeds 8 minimum wages;
• the employer is a small or medium-sized enterprise with an average annual number of employees not exceeding 250 people. 

In form, it can be oral or written if it contains conditions that differ from the general legally established ones. 

Also distinguished is a labor contract with unfixed working hours. This is a special type of document according to which the specific time of work performance is not specified. The employer independently determines the necessity and time of involving the employee in work, the scope of work, and also agrees with the employee on the work schedule and the duration of working hours required to perform the relevant work within the period stipulated by the labor contract. At the same time, the requirements of the legislation regarding the duration of working hours and rest time must be observed.

An important point when concluding any of these types of contracts is determining their term. Let's consider a fixed-term labor contract between an employee and an individual and its features in more detail. 

How to conclude a labor contract

When concluding a labor contract, the following documents must be submitted:

• passport or other identity document;
• employment record book;
• registration number of the taxpayer's accounting card (identification number).

In cases stipulated by law, the following may also be required:

• education documents (specialty, qualification);
• medical certificate — for example, for persons under 18 years of age, for employment in heavy work, work requiring professional selection, or work related to public service. Employment of such persons is carried out only after they provide a document on the results of a medical examination with a conclusion on the ability to perform the proposed work;
• other documents — for example, scientific workers may submit a list of published works.

It is mandatory to write an application for employment or formalize the labor contract in written form. If the labor contract is concluded in written form, an application is not required. If the labor contract is concluded orally, the basis for issuing an order for employment is the employee's application, which is usually drawn up manually on a standard A4 sheet of paper or on a form with stencil text.

Advantages and disadvantages of a fixed-term labor contract

A fixed-term labor contract is concluded in cases where labor relations cannot be established for an indefinite period due to the nature of the work, its performance conditions, the employee's interests, and other cases stipulated by law. 

Key characteristics of a fixed-term labor contract:

• the minimum term for concluding the contract can be 1 day, the maximum term is not defined;
• a probationary period can be established if the fixed-term labor contract is concluded for one year or more;
• annual leave, additional leave, and temporary disability registration are provided on general grounds;
• termination at will is not possible without valid reasons;
• extension of the labor contract is lawful if an indefinite-term labor contract cannot be concluded.

Advantages of concluding a fixed-term labor contract:

• replacement of a temporarily absent employee;
• involvement of employees in seasonal or temporary work;
• establishment of labor relations for a defined period based on the employee's interest (for example: family and household circumstances, work during an employee's internship or training);
• formalization of labor relations with foreigners;
• full preservation of all social guarantees from the employer (official salary, payment for leave, sick leave, compensation upon dismissal).

A disadvantage of concluding a fixed-term labor contract is the termination of labor relations after the agreed term. In addition, some employers sometimes use a labor agreement instead of a labor contract. Since the concept of a labor agreement does not exist in legislation, the employer bears no responsibility in case of incidents.

Hired employees often sign an addendum to the employment order rather than a labor contract. Although the employer's order, as an official document, guarantees all rights and freedoms, just like a labor contract, there is one important detail. The employer can change working conditions at any time — salary, duties, working hours, working days, establish part-time work. And all this will be legal, because a careless employee, by signing such documents, granted them these privileges.

How to extend a fixed-term labor contract

By mutual agreement, the parties can supplement and amend a fixed-term labor contract, including before its expiration. 

To amend the order on hiring an employee regarding the change in the term of the labor contract, a new order for such changes must be issued, regardless of the form of the labor contract (oral or written).

In case of only extending the term of the labor contract, on the last day of the employee's work under the fixed-term labor contract, an order to extend the term of such contract is issued based on an additional agreement or a written application from the employee. 

If after the expiration of the labor contract, labor relations actually continue and neither party demands their termination, the validity of this contract is considered extended for an indefinite period (according to Article 39-1 of the Labor Code). 

To avoid risks, when extending or re-concluding fixed-term labor contracts, one must be careful not to allow circumstances involving periodic dismissal and re-hiring of the same employees to perform the same labor function. 

In such a case, the court may recognize the labor contract as concluded for an indefinite period from the first day of its conclusion. 

How to correctly record a fixed-term labor contract in the employment record book

According to Instruction No. 58, it is not stipulated to indicate the terms of the labor contract in the employment record book: duration of working hours, work schedule, terms of remuneration, terms of employment (fixed-term labor contract, specific contract), presence or absence of a probationary period. 

Thus, when formalizing employment, entries in the employment record book are reflected as follows: 

The terms of employment can sometimes be learned from dismissal records. Thus, a fixed-term labor contract is terminated on the basis of: 

• Clause 2, Article 36 of the Labor Code of Ukraine;
• Clause 8, Article 36 of the Labor Code of Ukraine (violation of contract terms); 
• Clause 11, Article 40 of the Labor Code of Ukraine (employee who failed the probationary period).

How to draft an order for the extension of a fixed-term labor contract

Below, we provide examples of an application and an order for the extension of a fixed-term labor contract.

Example: Application for extension of a fixed-term labor contract

Example: Order for extension of a fixed-term labor contract

Termination of a labor contract

During martial law, legislation allows employers to temporarily suspend the validity of a labor contract without terminating labor relations.

Suspension of a labor contract means the temporary cessation by the employer of providing the employee with work and the temporary cessation by the employee of performing duties under the labor contract. This may occur due to military aggression against Ukraine, which makes it impossible to perform work.

According to Article 13 of the Law of Ukraine "On the Organization of Labor Relations under Martial Law", either party can initiate the suspension of a labor contract. The suspension is valid for a period not longer than the period of martial law.

The employer issues an order for the suspension of the labor contract, which specifies:

• reasons for suspension;
• period of suspension;
• list of affected employees;
• registration numbers of taxpayer accounting cards (RNOCPP) of employees;
• conditions for resuming the labor contract.

The employer is obliged to familiarize the employee with the order for the suspension of the labor contract and agree with the employees on a communication method that is acceptable to all parties.

How to terminate a fixed-term labor contract

The termination of a fixed-term labor contract occurs on the last day specified by this contract, and in case of its early termination, termination at the request of one of the parties and in other cases provided for by Article 36 of the Labor Code is possible. The order for the dismissal of an employee is issued on the last day of the fixed-term labor contract or on the eve, indicating the dismissal date stipulated by the fixed-term labor contract.

Dismissal due to the expiration of a fixed-term labor contract for pregnant women, women with children under 3 years of age, single mothers with a child under 14 years of age or a disabled child at the initiative of the owner or authorized person is allowed only in case of subsequent employment of such an employee, while it is mandatory to retain the average salary for three months after the expiration of the fixed-term labor contract. 

On their own initiative, by giving the employer 2 weeks' notice, an employee cannot terminate a fixed-term labor contract. Such a possibility is provided only if the contract is concluded for an indefinite period.

Grounds for termination of a fixed-term labor contract

In case of an employee's illness or disability preventing the performance of work under the contract, due to the employer's violation of labor legislation, collective or labor contract, and in cases provided for by Part 1, Article 38 of the Labor Code. 

Due to hostilities in the areas where the enterprise is located and there is a threat to the life and health of the employee, they may terminate the labor contract on their own initiative within the period specified in their application. 

The parties to the labor contract may reach mutual agreement on the early termination of the concluded labor contract. 

Conclusions

As a result of the information presented above, we can conclude that a fixed-term labor contract indeed serves as an important tool for regulating labor relations, providing a significant number of advantages for both parties – the employer and the employee.

It allows for guaranteeing all social conditions provided for by an indefinite-term labor contract, and is also ideally suited for performing project, seasonal, and temporary work, and for replacing temporarily absent employees.

Considering the legal and practical aspects, fixed-term labor contracts contribute to ensuring flexibility and stability in labor relations, as well as protecting the interests of both parties – the employer and the employee. 

Answers to frequently asked questions

• When is a labor contract considered concluded?

A labor contract is considered concluded from the moment the parties reach an agreement on all essential terms and the employee begins to perform their duties. According to Article 24 of the Labor Code of Ukraine (LCU), a labor contract is usually concluded in written form.

• When does a fixed-term labor contract become indefinite?

A fixed-term labor contract can become indefinite if, after its expiration, labor relations actually continue and neither party demands their termination. This is stipulated by Article 39-1 of the LCU.

• Who concludes a labor contract and what should its content be?

A labor contract is concluded between the employer (or their representative) and the employee. The content of a labor contract is determined in accordance with Article 21 of the LCU and should cover the following main conditions: place of work, labor function (position, specialty, qualification); duties of the employer and employee, terms of remuneration, work schedule, rest conditions (vacations), etc.

• What is a condition of a labor contract?

The main condition of a labor contract is the agreement of the parties for the employee to perform a specific labor function (work) in exchange for wages. Also an important condition is compliance with labor legislation, the collective agreement, if any, and local normative acts of the enterprise.

• Where is the labor contract stored?

The labor contract is stored with the employer. The original contract should be in the HR department or another responsible structural unit of the enterprise. When concluding a labor contract in written form, one copy is given to the employee, and the other remains with the employer.

References

1. Labor Code of Ukraine (LCU)
2. Law of Ukraine No. 2136 "On the Organization of Labor Relations under Martial Law" dated 19.07.2022 
3. Article 42 of the Law of Ukraine "On Employment of the Population" dated 14.10.2023 No. 5067-VI
4. On Approval of the Instruction on the Procedure for Keeping Employment Record Books of Employees No. 58

Abbreviations used in the text

LCU — Labor Code of Ukraine 

MW — Minimum Wage 

Alona Sydorkina
Project Manager