Fixed-term employment contract

Last updated 6.10.2023

An employment contract may be agreed for a fixed term for a justified reason. The law imposes restrictions on fixed-term employment contracts signed at the employer’s initiative. If the employment contract is agreed for a fixed term at the employee’s initiative, the restrictions specified in the law do not apply.

The employment contract can be agreed for a fixed term if the nature of the work so requires

In this case, the work involves a specific task or short-term work that the employer does not perform continuously. Such jobs include short-term projects and seasonal work. Seasonal work is performed in agriculture, forestry and tourism, for example.

Fixed-term employment may be based on a hiring a substitute

The grounds for hiring a substitute can be any absence of an employee, such as annual leave, study leave or family leave. It may also be based on on-the-job training as referred to in formal education and training programmes.

A fixed-term employment contract can be agreed if the employer has some other justified reason related to the company’s operations or the work to be performed

The reason must be appropriate and be related to work that is limited in terms of time or due to the nature of the work. Such reasons may include, for example, balancing production peaks or fluctuations in the order backlog.

According to the explanatory memorandum of the Employment Contracts Act, in some sectors, non-established demand at to the start of operations may be grounds for a fixed-term employment contract. The mere fact that operations are not established is not a justified reason, but it must be related to the start or significant expansion of operations.

A fixed-term employment contract is considered to have become valid until further notice if the employer allows the employee to continue working after the agreed contract term has expired.

The Employment Contracts Act prohibits successive employment contracts without a justified reason.

The law does not prohibit successive fixed-term employment contracts, but bans employers from attempting to circumvent the protections related to indefinitely valid contracts by signing successive employment contracts. Successive fixed-term employment contracts are possible, for example, when the employer offers a substitute new fixed-term substitute work after the previous contract has expired.

A long-term unemployed person, in other words a person who has been unemployed continuously for the previous 12 months according to the TE Services can be hired for a fixed-term employment relationship lasting up to one year without a justified reason. The continuity of unemployment is not interrupted by employment or public sector employment contracts lasting no more than two weeks. An employment contract with a long-term unemployed person may be renewed no more than twice, and the total duration of such fixed-term contracts may not exceed one year.  

On the other hand, it should be kept in mind that even the first fixed-term employment contract signed without a justified reason at the employer’s initiative is considered to be valid until further notice. If the conditions for successive fixed-term contracts are not met, the contract is considered valid until further notice from the date when the grounds for a fixed-term contract did not exist for the first time.

If several successive, uninterrupted or short-term fixed-term employment contracts have been signed between the employer and the employee, the employment relationship is considered to have been valid without interruptions for the purposes of determining employee benefits.