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Rise in use of fixed-term contracts

The use of fixed-term contracts has been growing since 2008 in the majority of EU countries – the exceptions being Germany, Portugal, Norway and Spain.

A fixed-term worker can be defined as ‘a person having a contract of employment or relationship entered into directly between an employer and a worker, where the end of the employment contract or relationship is determined by objective conditions such as reaching a specific date, completing a specific task, or the occurrence of a specific event’.

The Eurofound Industrial Relations Dictionary has a full definition of fixed-term work drawn from the text of Council Directive 1999/70/EC of 28 June 1999 concerning the Framework Agreement on fixed-term work concluded by ETUC, UNICE and CEEP.

The reason many employers prefer to hire people on fixed-term contracts is because it allows them to adjust employment levels to suit the business cycle. This gives them more control of the company’s finances. Temporary staff can provide a buffer for employers who can hire in a period of economic growth and lay people off during economic stagnation. The motivation for employers to avoid permanent contracts will be particularly high if such contracts give strong employment protection.

The use of fixed-term contracts, however, often means employment uncertainty for workers. Employers may also be inclined to invest less in the professional development of fixed-term employees compared to permanent staff. This may lead to the division of the labour force into ‘privileged’ employees who have indefinite contracts, high employment security and relatively higher human capital investment, and ‘disadvantaged’ employees who have low employment security and lower human capital investment.

Following the social partner framework agreement between ETUC, UNICE and CEEP, EU Member States are obliged to prevent abuse arising from the use of successive fixed-term employment contracts or relationships, in accordance with Article 2 of Council Directive 99/70/EC.

Mixed development of fixed-term contract use

The proportion of employees with fixed-term contracts has grown since Q2 2008 in the majority of EU countries. Exceptions are Germany, Norway, Portugal and Spain. It should be noted, however, that the overall EU average has been pulled down by the decline in such contracts in large economies such as Germany and Spain. Poland has the highest proportion (28%) of employees with fixed-term contracts among EU Member States. Spain, despite a decrease in the proportion of employees with fixed-term contracts over the last six years by more than five percentage points, is still in second place (14%).

Figure 1: Employees with a fixed-term contract by country (%)

figure_1_-_employees_with_a_fixed-term_contract_by_country_.jpg

Source: Eurostat

Between the second quarters of 2013 and 2014 the proportion of fixed-term contracts increased in 14 EU countries. The highest increase was seen in Cyprus (2.4%) and Greece (2%). In 11 EU countries and in Norway the proportion of fixed-term contracts decreased in the same period. The highest decrease took place in Latvia (-1.3%). In the EU28 as a whole the proportion of temporary contracts increased by 0.3%.

Table 1: Employees with a fixed-term contract as a proportion of the total number of employees, Q2 2013–Q2 2014 (%)

Source: Eurostat

Debates promote fixed-term contracts – Norway and Malta

In the third quarter of 2014, there were calls in Norway and Malta for a less restrictive approach towards fixed-contracts.

Norwegian consultative bodies gave their response to a proposal to amend regulations on temporary work to make it easier to hire workers on fixed-term contracts. The bill is supported by employers, while trade unions argue fiercely against it. The Labour Inspectorate has also criticised the bill. Part of the proposal covered the regulations on temporary agency work.

In Malta, the Chamber of Commerce, Enterprise and Industry warned in a report that businesses might be discouraged from investing in workers and recruiting if they were not allowed to employ people on temporary and flexible terms. The Chamber suggests the solution is to ‘beef up the Government competent authorities’, to regulate employment practices and to consistently sanction employers who abuse the use of fixed-term contracts.

Limiting fixed-term contracts – Croatia, Netherlands, Ireland, Estonia

A number of Member States, however, are moving in the opposite direction and limiting the use of fixed-term contracts in varying degrees:

In Croatia, the new Labour Law limits the maximum duration of fixed employment to three years regardless of changes to the employee’s role. Previously the time limit applied to a worker re-employed on successive fixed-term contracts to do the same work, and this was avoided by simply changing an employee’s job description.

In the Netherlands, the maximum duration of a series of fixed-term contracts will be reduced from 36 to 24 months. After two years, a new contract will automatically become a permanent employment relationship. No more than three successive fixed-term contracts can be given to one worker in this two-year period, and a fourth contract will be deemed permanent.

Previously, successive contracts were defined as a chain of contracts with less than three months between the end of one and the start of the next. The length of time between one contract and the next required to break the chain is now to be raised to six months. It will be possible for the social partners to negotiate deviations from the new provisions in collective agreements, but the criteria for deviation will be stricter.

Two further sectoral cases concern teaching staff in Ireland and teaching and research staff in Estonia.

In Ireland, the total length of consecutive fixed-term contracts for second-level teachers has been shortened. An expert report was commissioned under the terms of the public sector Haddington Road Agreement, and it concluded that the four years that a second-level teacher on a fixed-term contract had to wait before they became entitled to an indefinite contract should be cut. The new terms, accepted by the government, entitles them to an indefinite contract after two years as a fixed-term employee. Around a third of second-level teachers are on fixed-term and part-time contracts.

In Estonia, from 1 January 2015 new contracts for teaching and research staff will be open-ended. This follows changes in the Universities Act, Institutions of Applied Higher Education Act and Research and Development Organisation Act.

Currently, teaching and research staff work is regulated by five-year fixed-term employment contracts without automatic extension. After this time, the position is filled through open competitive recruitment.

In future, universities and other research institutions will be obliged to assess their regular teaching and research staff at least once every five years to validate their continuing qualification for the position.

The previous system will remain in force for directors, pro-rectors and visiting lecturers.

The aim of the change is to increase employee security and to increase the attractiveness of teaching and research positions. The change does not affect those whose employment contract was concluded before 1 January 2015.

Commentary

Recent developments reveal a trend of limiting the maximum duration of fixed-term contracts in several countries. This is in accordance with the Article 2 of Council Directive 99/70/EC introduced to prevent abuse of successive fixed-term contracts. This can be seen in the context of a growing relative number of fixed term contracts in the majority of the EU countries. By contrast, voices calling for more flexibility in use of fixed-term contracts have been heard in Malta and Norway.

About this article

This article is based mainly on contributions from Eurofound’s network of European correspondents. Further resources on individual employment relations around fixed-term contracts and other forms of flexible and temporary work are available in the following recent reports:

Eurofound 2014: Young people and temporary employment in Europe

Eurofound 2010: Flexible forms of work: ‘very atypical’ contractual arrangements

For further information, contact Karel Fric: kfr@eurofound.europa.eu