Permanent, Fixed-term contracts and notice period

DonDaddyD

Ok this has been going on for a while:

I'd like some clarity.

Being asked to be on a 12 month contract actually gives more job securtiy than being subject to 3 months notice!

A 12 month contract is a 12 month contract. That's 12 months job security. A three month notice period provides three months of job security. 12 is bigger than 3. Whilst the 12 month contract may also have a notice period that's not what I said. Excluding your various presumptions and qualifications (and your contradictory post above) a 12 month contract provides for 12 months work at a minimum. An unlimited contract with three months notice provides for three months work at a minimum.

Now my point is thus:

A contract period is a provision within a employment contract that states the length/type of employment. I.e permanent, fixed-term, temporary, part-time.

Notice period is a provision within the contract that states the length of time that has to be honored should either party choose to end the contract early where no serious breach has occured.

In my mind length of employment (contract period) and notice period are not directly comparable.

When applying for a job you don't apply to work a notice period. You aren't hired to work a notice period. You do apply on the basis of type of contract and length of the contract. i.e. permanent, fixed, temporary, part-time.

Therefore you compare contracts against each other. You may compare notice period against each other.

Someone else, please shed some clarity.

Spen?

(If I'm wrong I would have learned something)

greg66_tri_v2.0

My two pence:

Being asked to be on a 12 month contract actually gives more job security than being subject to 3 months notice!

This is literally correct. Practically speaking, it's wrong.

Twelve month contract obviously means you have twelve months work, and 12 months earnings (even if booted early, subject to you not being able to find somewhere else to work for the balance of the 12 months). Then nada.

Three months notice means (again, obviously) that you can be out on your ear on three months notice. "Can" is the key word. Getting rid of an employee using this sort of no-fault notice provision is not very common. The fact is that most employees work for years, until such time as they decide to resign to work elsewhere, never being remotely threatened with the chance of losing their jobs in three months' time. In practical terms, an employment contract is a long term prospect, expected (by both sides) to run far longer than a year.

Empirical evidence? Well, what does a third party think? Take two people, one employed with a three month notice period, and one on a twelve month contract. Walk them into a bank and have them both apply for a mortgage at, oh, 2.75 times annual pay. Pretty sure you'll find the contractor doesn't get very far. The bank looks at job security in the sense of the likelihood of the borrower being able to honour his promise to repay the debt. It is likely to regard the contractor's ability to repay as tailing off in month 13 of the mortgage loan. Conversely, it is likely to look at the employee's ability as continuing until retirement.

That's life.

tgotb

In my experience, when times get tough the contractors are always the first to go. Despite permanent employees having a defined notice period, an employer will normally make a much greater effort to hold on to them.

On becoming surplus to requirements, a permanent employee will be made redundant, with appropriate compensation etc; a contractor will just be shown the door.

greg66_tri_v2.0

TGOTB wrote:

In my experience, when times get tough the contractors are always the first to go. Despite permanent employees having a defined notice period, an employer will normally make a much greater effort to hold on to them.

On becoming surplus to requirements, a permanent employee will be made redundant, with appropriate compensation etc; a contractor will just be shown the door.

Quite. Contractors are much cheaper to get rid of than employees (due to all sorts of employment law stuff that sits on top of an employment contract), so they stand much closer to the edge of the cliff.

bigmat

Don't most fixed term contracts have a comparatively short notice period anyway? (like a week? - often weighted in favour of the employer). And if there was no notice period stated, could a reasonable one be implied? (not sure about that, maybe not but would possibly depend on the length of the contract). Also you don't accrue employment rights in the same way as a contractor and are more vulnerable to cutbacks as discussed above. Flip side is you should get paid more. These are all sweeping generalisations though, I know contractors who have outlasted permanent employees through numerous staff culls.

tailwindhome

Greg66 wrote:

My two pence:

Being asked to be on a 12 month contract actually gives more job security than being subject to 3 months notice!

This is literally correct. Practically speaking, it's wrong.

Twelve month contract obviously means you have twelve months work, and 12 months earnings (even if booted early, subject to you not being able to find somewhere else to work for the balance of the 12 months). Then nada.

Three months notice means (again, obviously) that you can be out on your ear on three months notice. "Can" is the key word. Getting rid of an employee using this sort of no-fault notice provision is not very common. The fact is that most employees work for years, until such time as they decide to resign to work elsewhere, never being remotely threatened with the chance of losing their jobs in three months' time. In practical terms, an employment contract is a long term prospect, expected (by both sides) to run far longer than a year.

Empirical evidence? Well, what does a third party think? Take two people, one employed with a three month notice period, and one on a twelve month contract. Walk them into a bank and have them both apply for a mortgage at, oh, 2.75 times annual pay. Pretty sure you'll find the contractor doesn't get very far. The bank looks at job security in the sense of the likelihood of the borrower being able to honour his promise to repay the debt. It is likely to regard the contractor's ability to repay as tailing off in month 13 of the mortgage loan. Conversely, it is likely to look at the employee's ability as continuing until retirement.

That's life.

Thread should end here

It won't, but it should.

DonDaddyD

Twelve month contract obviously means you have twelve months work, and 12 months earnings (even if booted early, subject to you not being able to find somewhere else to work for the balance of the 12 months). Then nada.

Three months notice means (again, obviously) that you can be out on your ear on three months notice. "Can" is the key word.

Query: In this context you're talking about notice on its own and not from the perspective of being attached to a contract, which it would be.

If you are comparing a fixed term contract against the job security of a notice period wouldn't you take into consideration the actual contract type and length of employment that the notice period is a part of?

Surely.

What if the 3 months notice was part of a 24 month contract. Then yes a 12 month contract would offer more job security than a 3 months notice, but the 24 month contract (that the notice period is a part of) offers more job security than 12.

In my experience, when times get tough the contractors are always the first to go. Despite permanent employees having a defined notice period, an employer will normally make a much greater effort to hold on to them.

On becoming surplus to requirements, a permanent employee will be made redundant, with appropriate compensation etc; a contractor will just be shown the door.

My experience as well. Agree 100%

DonDaddyD

MatHammond wrote:

Don't most fixed term contracts have a comparatively short notice period anyway? (like a week? - often weighted in favour of the employer). And if there was no notice period stated, could a reasonable one be implied? (not sure about that, maybe not but would possibly depend on the length of the contract). Also you don't accrue employment rights in the same way as a contractor and are more vulnerable to cutbacks as discussed above. Flip side is you should get paid more. These are all sweeping generalisations though, I know contractors who have outlasted permanent employees through numerous staff culls.

Short answer there is no rule.

Some fixed terms have 3 months notice, some do not.

I think it comes down to company policy and skill of the person who writes the contract.

Stuey01

Greg66 wrote:

TGOTB wrote:

In my experience, when times get tough the contractors are always the first to go. Despite permanent employees having a defined notice period, an employer will normally make a much greater effort to hold on to them.

On becoming surplus to requirements, a permanent employee will be made redundant, with appropriate compensation etc; a contractor will just be shown the door.

Quite. Contractors are much cheaper to get rid of than employees (due to all sorts of employment law stuff that sits on top of an employment contract), so they stand much closer to the edge of the cliff.

This is true, it is much harder (and more expensive) to get rid of a permanent employee, especially if the industry is unionised. Contractors are easy, just don't renew. Most contractors are on less than 3 months notice anyway so you may not even have to wait til the end of the term.

greg66_tri_v2.0

DonDaddyD wrote:

Query: In this context you're talking about notice on its own and not from the perspective of being attached to a contract, which it would be.

Nope.

I'm comparing (a) a contract of employment which contains a three month notice period, where notice can be given without cause, and
(b) a 12 month contract which will run for 12 months unless terminated for cause (eg for dishonesty). This contract can only be terminated for cause.

DonDaddyD wrote:

If you are comparing a fixed term contract against the job security of a notice period wouldn't you take into consideration the actual contract type and length of employment that the notice period is a part of?

Surely.

What if the 3 months notice was part of a 24 month contract. Then yes a 12 month contract would offer more job security than a 3 months notice, but the 24 month contract (that the notice period is a part of) offers more job security than 12.

Short, fixed term contracts almost never have provisions that allow termination without fault though. That would be a contract where the employer says "heads I win and tails you lose".

FWIW, if you have
(a) a 12 month contract that permits termination on 3 months notice without cause, and (b) a 24 month contract that permits termination on 3 months notice without cause,
then I think you've got a distinction without a difference. Neither is long enough to offer sufficient job security to interest a lender; the notice provisions don't come into it.

rml380z

Greg66 wrote:

Short, fixed term contracts almost never have provisions that allow termination without fault though. That would be a contract where the employer says "heads I win and tails you lose".

Not in my experience, but it might be industry-specific.
All my fixed-term contracts have shorter, no-fault, notice-periods.
The trend seems to be for a short notice period for the employer but no equivalent for the employee.

DonDaddyD

Greg66 wrote:

DonDaddyD wrote:

Query: In this context you're talking about notice on its own and not from the perspective of being attached to a contract, which it would be.

Nope.

I'm comparing (a) a contract of employment which contains a three month notice period, where notice can be given without cause, and
(b) a 12 month contract which will run for 12 months unless terminated for cause (eg for dishonesty). This contract can only be terminated for cause.

Even in that event if you were determining job security you would compare like for like so length of contract against length of contract. When determining the exit requirements then you would look at notice stipulations for both contracts to determine the job security of that. Those coupled together would give you a broader idea.

But I can see that assumption of the contract type scews the perspective. Notice without cause wasn't clearly specified so I simply saw it as ordinary Notice with cause.

Short, fixed term contracts almost never have provisions that allow termination without fault though. That would be a contract where the employer says "heads I win and tails you lose".

Almost means that we can't exclude the possiblity from consideration.

FWIW, if you have
(a) a 12 month contract that permits termination on 3 months notice without cause, and (b) a 24 month contract that permits termination on 3 months notice without cause,
then I think you've got a distinction without a difference. Neither is long enough to offer sufficient job security to interest a lender; the notice provisions don't come into it.

Fair point.

W1

DDD has anonymised the various quotes, presumably in order to make this thread less heated. That's fair enough, but I think some context is useful:

Rolf F wrote:

andyrm wrote:

Just popped out for a few minutes to the post office, and while I was out had a bit of a revelation. Put all public sector workers on 12 month contracts with a renewal meeting every 12 months. It would swiftly weed out the dead wood and allow the cream to rise to the top.

Destroy any job security to the extent that the entire public sector workforce would be unable and unwilling to buy a house (for example)?

andyrm wrote:

By "destroy job security", do you mean "remove the jobs for life culture regardless of performance"? In which case yes I 100% advocate this.

W1 wrote:

I work on a three month notice period - what sort of job securtiy do I have?

Rolf F wrote:

Because you work on a 3 month notice period, everyone else should as well? What sort of argument is that? In what way is a society where everyone could be kicked out of their jobs at 3 months notice a good one.

Or in other words, the risk of being "kicked out of their jobs at 3 months notice" is not great job security.

W1 wrote:

All I'm saying is don't get your knickers in a twist about 12 month contracts which - if you're doing your job properly and efficiently - will be renewed.

You raised the issue of job security and bleated about that being unfair - I'm just pointing out that it rarely exists anywhere. Being asked to be on a 12 month contract actually gives more job securtiy than being subject to 3 months notice!

"Jobs for life" is not a driver of efficiency.

W1 wrote:

I was attending to the objection regarding 12 month contracts on the basis of job security by simply outlining that it's actually not that much of a problem - and is a good way to get rid of dead wood.

And at that stage DDD added in various qualifications and additions to the "contract" (such as a notice period) which "may" apply - no-one had previously mentioned them, so it's not clear why they were added at this stage.

DonDaddyD wrote:

You wouldn't be on a 12month contract or have 3 months notice. You would likely have a 12months contract and * months notice.

The two, as I said before, are two different employment concepts that often work together. A notice period is often part of the contract.

A contracts shouldl state (not all do) the existence of a notice period (whether there is one or not).

So obviously this is where the confusion lies - no-one had discussed notice periods within a fixed term contract, nor was that the point being made by anyone.

DonDaddyD wrote:

That's 12 months job security.

Yes as long as the contract isn't terminated or cancelled. Should the contract end early it is likely that a notice period will need to be served - this is the corner stone of my entire point.

He then went on to say that notice periods and contract terms are not comparable - which, being periods of time, they of course are.

The last point was that:

DonDaddyD wrote:

If you have 3 months notice and are on a permanent contract you have more job security than a person on a fixed term contract regardless of their notice period. Why? Because the person on the fixed term contract understands that it is going to end. Hence less security.

To which I said:

W1 wrote:

A 12 month contract is a 12 month term. Ignoring a presumed notice period (because, unless expressly provided for, there won't be) that provides a 12 month period of job security. Now if you want to presume a notice period, then that is your presumption.

Suffice to say, in summary, that "job security" is not a particularly strong argument against giving the public sector 12 month (fixed) contracts. There may be other arguments, but that's a poor one.

And this:

W1 wrote:

knowing that something is going to end in 12 months time is not the same as constantly being aware that it could end in three months. I would argue it gives knowledge over a longer period of time and that is more secure than the unknown.

Job security is obviously subjective - I'd be surprised (bearing in mind the proposed cuts next month) if public sector employees didn't jump at fixing a year long contract now in order to have better job securitiy....

And then it all went back to talking about comic book theoretical fights. Quite apt, really.

Now some people (in the current climate) may be happy to consider 12 months of employment on a fixed term contract as decent job security. Others may think that three, or even one, months' notice but a permanent contract provides better job security. As I said, it's subjective. It will depend on the role, and the person.

A contractor is usually self employed, hence banks' aversion to lending. Even if a contractor is on a 10 year contract (which is pretty bloody amazing job security!) then the bank would still be concerned and may refuse to lend. That, as Greg says, is life. Banks are not exactly known for always getting lending decisions right though!

DDD has made it a mission to follow me around with this topic on a couple of other threads which doesn't make me lose any sleep but does make me wonder what might be achieved in doing so.

W1

Greg66 wrote:

My two pence:

Being asked to be on a 12 month contract actually gives more job security than being subject to 3 months notice!

This is literally correct. Practically speaking, it's wrong.

We were neck deep into literals, bearing in mind it will never happen!

Practically a number of elements could be added to a contract to give much greater security - but that would mean a theoretical debate that could have infinite variables.

DonDaddyD

Now some people (in the current climate) may be happy to consider 12 months of employment on a fixed term contract as decent job security. Others may think that three, or even one, months' notice but a permanent contract provides better job security. As I said, it's subjective. It will depend on the role, and the person.

A permanent job and three months notice clearly offers more job security that 12 months of employment with any kind of notice.

That has been my point. You don't look at the notice (assuming the notice is notice period with cause) period, you look at the length of employment of both contracts.

What's more I've worked 12 months fixed-term contract with 3 months notice.

W1

DonDaddyD wrote:

Now some people (in the current climate) may be happy to consider 12 months of employment on a fixed term contract as decent job security. Others may think that three, or even one, months' notice but a permanent contract provides better job security. As I said, it's subjective. It will depend on the role, and the person.

A permanent job and three months notice clearly offers more job security that 12 months of employment with any kind of notice.

That has been my point. You don't look at the notice (assuming the notice is notice period with cause) period, you look at the length of employment of both contracts.

What's more I've worked 12 months fixed-term contract with 3 months notice.

Why are you again adding a fictional element of notice to the 12 month contract when no-one but you has mentioned it? I'm talking about a permanemnt contract with three months notice, compared to a 12 month contract.

And again, you are adding your opinion as fact.

DonDaddyD

Alright I do like a Barney but I'm willing to kiss and make up.

sketchley

Are there not three contract types to consider?

1. A Full Time Contract with a notice period.

Although you can be given a notice period to cancel the contract, it can only done so under employment law, therefore you can only be made redundant (or fired for misconduct). When making you redundant your employer has to give three months notice (paid) and also pay redundancy / compensation, also employer can't simply replace you as you were made redundant. If the employer is simply giving notice for no reason this would be unfair dismissal and you would be entitled to compensation, loss of earnings etc.

2. A fixed term employment contract with a notice period, where your employer is paying PAYE and employer NI. If contract is less than one year at the end of the contract it ends and there is nothing you can do about. Also within one year your employer can give notice as per contract and that’s it.

Once past a year (or exactly one if contract is one year contract) you have right not to be unfairly dismissed and not renewing the contract counts as unfairly dismissed (after one year).

Once past 2 years you have full redundancy rights to. This mean you’re effectively full time after 2 years anyway.

Stuff on this here

http://www.direct.gov.uk/en/Employment/ ... /DG_175138

3. A contract between you or your limited company to provide labor to a third party (Employer NI and PAYE is handled by you or your ltd company). This is normally how IT contracting works. Under this type of contract you, or you ltd company is contracted to provide labor to the third party, and you are self employed or employed by your own ltd company, this is the total scope of the contract, at the end of the contract or if the contract is subject to termination clauses the contract ends. You have no 'rights' against the third party in respect of employment law as you are either self-employed or employed by your limited company. However, the third party is bound by the terms of the contract, so will have to pay for 12 months labor if they use it or not, unless there is a termination clause.

In this case yes you are guaranteed 12 months income, but you have no protection of employment so a mortgage company may be reluctant to lend, you would need to get a self assessment mortgage which is now quite difficult.

greg66_tri_v2.0

W1 wrote:

<snip the labyrinthine account of the intricacies of "yeah but", "no but">

A contractor is usually self employed, hence banks' aversion to lending. Even if a contractor is on a 10 year contract (which is pretty bloody amazing job security!) then the bank would still be concerned and may refuse to lend. That, as Greg says, is life. Banks are not exactly known for always getting lending decisions right though!

Aside from a lender's willingness to lend against the prospects of a person continuing to earn money, how else, objectively, do you measure job security?

greg66_tri_v2.0

Sketchley wrote:

Are there not three contract types to consider?

Yes. 1 = secure. 3 = Not secure. 2 = In the middle. Security depends.

alfablue

Sketchley is absolutely right, and this has been missed from the discussion, permanent employment, after you have served 12 months offer various protections against unfair or constructive dismissal under employment law (though most employees unfairly dismissed just jump like lemmings as if they have no redress). In the current economic climate I would be extremely unwilling to give up this status, and I think it would be unwise to do so unless the short term gains were of a very large magnitude indeed!

W1

Greg66 wrote:

W1 wrote:

<snip the labyrinthine account of the intricacies of "yeah but", "no but">

A contractor is usually self employed, hence banks' aversion to lending. Even if a contractor is on a 10 year contract (which is pretty bloody amazing job security!) then the bank would still be concerned and may refuse to lend. That, as Greg says, is life. Banks are not exactly known for always getting lending decisions right though!

Aside from a lender's willingness to lend against the prospects of a person continuing to earn money, how else, objectively, do you measure job security?

On a very simple basis, by assessing how long that person will continue in their job (and continue to bring in the same income).

wgwarburton

Hi,
In the finance industry at the moment there are permanent employees who are very worried about their job security. Working alongside them are contractors, on three-month or shorter contracts who are not particularly concerned.

This seems odd, at first glance, but it's happening because the banks are seeking to reduce their payrolls and headcount, however they still have lots of work that needs doing. They are able outsource work to service companies to reduce their cost base, and the service companies can take on contractors to meet the short-term demand. Obviously, they arn't doing exactly the same jobs... I would guess that that wouldn't be legal.


Flexible working- it's a competitive advantage for the UK...

For the contractor life can be unpredictable. A personality clash can result in termination of a contract at pretty-much zero notice... or you can be on a site for years while "permanent" employees arrive, get disillusioned and move on.
IIRC, I once worked at the same desk for three different organisations over a period of time, and not as a result of the fashion for name changes.
As a contractor you are in a position of control, but are almost never in a position to exercise it. Technically, you can walk away from a contract but you can't afford to get a reputation for unreliabilty.
On the other hand, whatever unpleasantness is going on at your work is likely to pass you by and be someone else's problem in a few months time.

Job security means different things to different people.

Cheers,
W.

vorsprung

It's good to read the "Commuting Chat" forum for interesting stories about cycle commuting isn't it?

wgwarburton

vorsprung wrote:

It's good to read the "Commuting Chat" forum for interesting stories about cycle commuting isn't it?

Yes, it can be... OTOH the forum's purpose is to "discuss here anything you want, whether bike related or not!"... so it shouldn't be much of suprise to see non-commuting items here.

Cheers,
W.

neiltb

the contract/permanent thing is similar here in Canada. The contract status where I worked is often used as an extended trial term, I was on a 1 year contract, extended 3 months and then hired permanently. Others in the same dept, similar role could and were let go with 2 weeks wages.

daviesee

Contracts and notice are 2 entirely different beasts.

A contract usually is the minimum length of time that a contractor can expect to be there - if everything goes peachy. Contract can be anything from 2 weeks to 2 years. (Usually rolling but that's another matter).
Notice is when it goes pear shaped and is usually a week.

As a contractor you pretty much have the option of accepting or rejecting an offer. If you accept you pretty much have to take what is thrown your way, or walk. If they think you don't come to scratch you are out the door. Negotiations are non-existant. (As an aside, always negotiate before you accept. Once you are in it is too late. This applies to permanent also).
The positive flipside is that a contractor is very rarely involved in office politics - a major bonus as far as I am concerned.