Q&A: New rights for contract workers

From 1 October, more than a million contract workers will have new employment rights. This means they can not be treated less favourably than permanent staff. According to Osborne Clarke, a law firm, only one in ten companies are aware of the change. So how will it affect workers and businesses?

What is it?

On 1 October the Fixed term Employees (Prevention of less Favourable Treatment) Regulations, originally a European Union Directive, becomes part of UK law.

Who is covered?

The regulations are aimed at improving employment rights for people who work on fixed-term contracts.

For example, people who are employed on seasonal work, someone's maternity leave or on a project, such as setting up a new database or running a training course.

Who is not covered?

One of the big concerns is the rules do not apply to people who are placed in work by a temping agency.

This is because the regulations apply only to fixed-term employees who have an employment contract with the employer they work for.

Apprentices, and some students on work experience placements will also miss out.

What does it mean?

Under the new regulations, contract workers can not be treated less favourably than someone doing a similar permanent job, unless it can be "objectively justified by the employer".

For example, a permanent member of staff may be given free membership of a workplace gym, paid more, get better holiday or be a member of the company pension scheme, all of which is denied to the contract worker.

But companies will still be able to limit their employment liabilities under the new system.

If the employer does not want to give the right, it must justify it according to three principles:

• It is to achieve a legitimate business objective

• It is necessary to achieve that objective

• Is an appropriate way to achieve that objective.

What will I get?

Employers can choose to look at an overall package of terms and conditions, when they are considering complaints from contract workers.

For example, an employer can compensate a fixed-term employee through a higher salary, instead of membership of the company pension scheme.

In addition, a company may decide not to offer a car to someone on a three-month contract, but offer help with travel in another way.

What about holidays?

Some employers offer extra holiday, which is accrued according to length of service.

Under the new regulations fixed-term employees and permanent staff must be treated the same in this regard, unless the company can justify that they should work a longer period in order to qualify for extra holidays.

Redundancy rights?

Under existing fixed-term contracts, workers typically waive their right to redundancy pay.

But workers who have contracts renewed, agreed or extended after 1 October 2002 will no longer have the option to waive their rights to redundancy pay if they have been continuously employed for two years or more.

Other benefits?

Contract workers will have the right to ask their employer in writing for a written statement giving the reason for any less favourable treatment. This can be used at an employment tribunal hearing, and must be produced within 21 days.

All employees on project work, and on contracts of three months or less will have the right to a week's notice if their contracts are terminated before it expires, and they have completed more than one month of continuous service.

Similarly, workers will also have to give employers one week's notice if they want to terminate the contract.

Contract workers on fixed terms of less than three months may have a right to sick pay if they fall ill, as long as they have been working under that contract for at least one month.

Further information:

Further information can be found on the Department of Trade and Industry website (see right):

Fixed Term work. A guide to the regulations (PL512)".

Rights to notice and reasons for dismissal PL707.

Redundancy payments (PL808).

Suspension from work on medical or maternity grounds under health and safety regulations (Pl705).

Dismissal - fair and unfair (PL714).

Rights to notice and reasons for dismissal (PL707).