Fixed-term employment contract - Useful information for employees and employers

The second option is seen as an exception that can only be applied in certain circumstances because some employers might abuse the rights of employees by offering a job for a limited period. For this reason, it is essential that both parties involved in an employment relationship know precisely what is involved in concluding such a contract so that complex legal problems do not arise.

Publication date: 5 July 2023

The following article provides interested parties with valuable information on the termination of a fixed-term employment contract by giving a brief overview of the legal provisions governing the situation and outlining the content of such a contract. In addition, a list of the main advantages and disadvantages of the employment relationship and the practical arrangements for terminating or ending it will be available.

Contents:

1. What is a fixed-term employment contract

1.1.Legal provisions on fixed-term individual employment contracts

1.2. Content of the fixed-term employment contract

2. Advantages and disadvantages of concluding a fixed-term employment contract

2.1. Advantages of concluding a fixed-term employment contract

2.2. Disadvantages of terminating a fixed-term employment contract

3. Procedure for signing, suspending and terminating a fixed-term employment contract

1. What is a fixed-term employment contract

The Romanian law governing labour relations is the Labour Code, which provides all the necessary details for the smooth running of work for all parties involved. This document stipulates that it is obligatory for the employee and employer to conclude a written agreement in the form of an individual employment contract.

Article 10 of the Labour Code specifies that a document is a contract by which an employed individual undertakes to perform work for an employer, whether a natural or legal person, in return for payment of a salary. Individual employment contracts are distinguished primarily by their duration. Normally, in most cases, the law stipulates that this duration is not fixed (indefinite).

However, in order to resolve certain problematic situations, employers also have the possibility of concluding such a contract for a limited period of time. This type of contract is referred to in specialist language as a fixed-term individual employment contract. The legislation provides for specialised regulation to remove the danger of employers abusing their employees.

1.1. Legal provisions on fixed-term individual employment contracts

Useful information on fixed-term individual employment contracts is available in the annotated Labour Code, Title II, Chapter 6. The main provisions here are:

• Article 82 specifies the possibility of concluding a fixed-term employment contract and how this is done (only in written form), how it can be extended and what the maximum duration of such a relationship is. Normally, the duration of such a contract is twelve months, with the possibility of successive extensions to a total of three contracts, not exceeding thirty-six months;
• Article 83 specifies in which cases the fixed-term employment contract may be applied. Employers are only allowed to use this form if they are replacing a suspended employee (unless they are on strike), if they are carrying out work of a seasonal nature, when employing a person who meets the conditions for retirement within five years of signing the contract, for carrying out work, projects or programmes limited in time and when employing pensioners who are allowed to receive both pension and salary;

• Article 85 specifies the length of probationary periods for a fixed-term contract. They vary between five and forty-five days, depending on the duration of the contract;

Article 86 gives employees the possibility of converting a fixed-term contract into an indefinite contract;
Article 87 specifies the equality of fixed-term employees with employees on indefinite contracts who perform similar work.

1.2. Content of the fixed-term employment contract

The individual fixed-term employment contract must contain a set of information that clearly shows how the employment relationship will work in order to avoid problems later on. Article 17 of the Labour Code specifies the minimum information that must be included in any employment contract:

• The identification details of the employer and the employee;
• The place of work to be obtained;
• The position to be filled;
• How the employee will be evaluated;
• Any risks to which the employee is subject;
• Duration of the employment relationship (maximum 12 months for each contract);
• Rest leave that can be obtained;
• Salary received and the date on which it is paid;
• Number of hours worked daily and weekly;
• Length of probationary period.

Employers should be aware that not having such a fixed-term contract or concluding it in an incomplete way is illegal work and is considered a criminal offence, and the fines that can be imposed if labour inspectors identify these situations can be very heavy.

To avoid such situations, any employer can turn to business consultancy firms offering HR and payroll services to ensure that any employment contract is properly concluded. In addition, companies of this type can also offer other useful services such as accounting, administrative services, etc.

2. Advantages and disadvantages of concluding a fixed-term employment contract

Încheierea unui contract de muncă pe perioadă determinată oferă ambelor părți implicate atât elemente utile, cât și unele ce sunt mai puțin plăcute. Avantajele și dezavantajele contractului pe perioadă determinată trebuie să fie puse în balanță, decizia apelării la o astfel de relație de muncă trebuind să fie făcută de angajat și de angajator, în urma luării acestora în considerare. Semnarea acestui document impune anumite obligații pentru semnatari și, din acest motiv, nu trebuie să fie făcută la repezeală, fără a deține anumite informații utile.

2.1. Advantages of concluding a fixed-term employment contract

The advantages of this type of contract can be seen from a double perspective, both from the employer's and the employee's side. The employer can gain flexibility in managing human resources to meet labour needs at certain times when carrying out special projects or during periods of heavy seasonal activity.In addition, they have the chance to test potential employees for a longer period than the statutory probationary period. If they are satisfied, the law provides for the possibility of changing the contract from a fixed to an indefinite period by adding an addendum to the original contract.

Employees also benefit from using this form of employment. They can gain work experience that can be used later in the same job or with another employer. Another advantage is quick access to work, as contracts of this type are easier to obtain than permanent contracts. It is also important to bear in mind the possibility sought by some employees to have breaks between jobs.

2.2. Disadvantages of terminating a fixed-term employment contract

The disadvantages of this employment relationship are also significant, with both parties having something to lose if they prefer the duration of the contract to be fixed and limited. Employers have no certainty of the human resources available to them. Frequent replacement of employees is problematic because it brings additional costs in terms of HR services.In addition, it is possible that the qualified and experienced person will be replaced by a rookie who is not as productive.

Getting access to skilled people is also problematic, especially in this period when skilled labour is hard to find. Another situation relates to employee motivation. Often workers of this type are not motivated to get involved in long-term projects.

Employees try to avoid fixed-term contracts because they want job security. They do not know whether the contract will be extended at the end of the period or converted to an indefinite contract. Another problem is related to the employees' relationship with lending institutions. Many banks avoid giving loans to people working for a fixed period because they have no guarantee that they will get their money back.

3. Procedure for signing, suspending and terminating a fixed-term employment contract

People involved in employment relationships who use fixed-term employment contracts need to be aware of the details of signing, suspending and terminating a fixed-term employment contract, as well as other problematic situations that may arise during the term of the contract.

As far as the signing of the contract is concerned, the procedure is compulsory in all cases where an employment contract is concluded.

Basically, the employer makes an offer regarding pay and working conditions, which the employee accepts, both in the form presented and after negotiation. Legislation requires that the agreement be in writing, and not verbally. The document must comply with the model fixed-term employment contract, which is compulsory, and contain all the information necessary for both parties to ensure that the work is carried out properly.

Suspension of the fixed-term employment contract can only be carried out under the conditions of the law. Thus, it is specified that this suspension must be temporary in certain circumstances, such as temporary incapacity for work, following sick leave, pregnancy or child-raising.

The extension of the fixed-term employment contract is possible by complying with the provisions of the Labour Code. This document states how long a fixed-term contract can be extended, how it is extended and how often it can be extended.

The employment contract can be extended at the end of the previous contract. The employer may only use this option three consecutive times for periods of up to twelve months each. After a maximum of thirty-six months of employment of a fixed-term employee, the employer has two options: terminate the employment relationship or convert the contract into a contract of indefinite duration.

Article 83 of the Labour Code states that a fixed-term employment contract may be extended after the expiry of the initial term only if both parties agree and this agreement is stated in writing. Moreover, if the person has been employed to carry out a project, programme or work, the extension may be made only until completion and no longer.

If such a situation arises, the employer has to conclude a new contract if it wants to keep the workers after the project is finished. If the employer has concluded one or a maximum of two fixed-term contracts, he may choose to conclude another contract.

If this solution has already been exhausted, the employer is obliged to sign a permanent contract.

Termination of a fixed-term employment contract can occur in several circumstances:

• At the end of the term of the fixed-term employment contract, when it automatically terminates without further notice from the employer to the employee;
• Before the end of the term, for objective reasons, by agreement between the two parties or unilaterally, the fixed-term employment contract may be terminated.
• In the first circumstance, the employer is obliged to give the employee at least twenty days' notice, and the second circumstance may apply following the employee's resignation;
• At the end of the period provided for in the initial contract, if the employer no longer wishes to extend it, he may reject it without giving any reason, and the employee has no possibility of contesting this. The extension of the contract is the employer's sole responsibility, and there is no legal obligation to do so, but only in response to needs observed by the employer.

In conclusion, the parties involved in the employment relationship must be aware of the legal provisions on the conclusion of a fixed-term employment contract in order to avoid problematic situations arising.

*This material has been prepared for information purposes only and is not intended to provide tax, legal or accounting advice. We recommend that you consult with your tax, legal and accounting teams before making any decisions on the topics mentioned in this article.