What to look out for in your fixed-term employment contract

What to look out for in your fixed-term employment contract
Jobstreet content teamupdated on 05 March, 2024
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There are many types of employment out there, and knowing what you're getting into is important. Whether you're choosing fixed-term work or to be a permanent employee, embarking on a new job opportunity brings many decisions. This also means understanding your employment contract. Not knowing your terms of employment can leave you vulnerable to unexpected challenges. These details can hold you back from making informed decisions about your career. 

We navigate the intricacies of fixed-term contracts in this guide to empower you as a job seeker. Here's what we'll cover:

Types of employment contracts 

Employment contracts are the foundation of employer—employee relationships. They outline the terms, conditions, and duration of your employment. The most common type of employment is permanent work, but contract and fixed-term work are rising in popularity. Let's look at the differences between these employment types: 

Permanent employment contracts 

A permanent employment contract establishes a long-term relationship between an employer and an employee. Employment is ongoing. The contract has no predefined end date. Permanent employment can offer a lasting, stable relationship between you and your employer. 

Common characteristics of permanent employment contracts are:

  • Long-term commitment: The employer offers you a permanent position in the company. This can provide stability and job security.
  • Career development: Permanent roles can come with many opportunities. Employees can often grow their careers, develop skills, and advance in the company.
  • Comprehensive benefits: Employees with a permanent contract usually enjoy a full range of benefits. These can include health care, retirement plans, and paid time off.
  • Legal protection: Permanent employees often enjoy legal protection against unfair dismissal. They also have various employment rights under Employment Act 1955. 

Fixed-term employment contracts 

A fixed-term employment contract specifies the duration of your employment. These contracts usually mention a predefined end date. A fixed-term job may end on the completion of a project, for example. Employers usually want their fixed-term contracts to align with business needs. 

Fixed-term employment is common in industries that don't need full-term employees to operate. These industries may have seasonal fluctuations, project-based work, or limited hiring opportunities. Here are some things you can expect when you enter fixed-term employment:

  • Temporal: Temporal employment means the work is for a specified period. Contracts can cover months or years. The employer should provide a clear timeline for this employment relationship.
  • Project-based: Employers often use project-based contracts for project-specific roles or seasonal work. In these instances, the employer should specify both the duration and the scope of the work.
  • Flexible: Flexible fixed-term contracts give employers flexibility in managing workforce needs. Companies often use these for temporary or short-term business demands.
  • Limited benefits: Fixed-term employees may have fewer benefits than their permanent co-workers.
  • Legal protection: Fixed-term employees are entitled to legal protection, especially unfair dismissal claims. These provisions usually apply to those employed for more than 3 months on their contracts. 

Considerations 

Here are some points to consider when choosing between a permanent or temporary role.

  • Employee preferences: Choose a role that fits your career goals, lifestyle, and preferences. Your goal is to have a fulfilling job that motivates you and promotes your work-life balance.
  • Employer needs: Choose a role that balances your personal and professional responsibilities. Ensure that you can meet the terms of the contract to fulfil the employer's needs.
  • Legal compliance: Employers must follow local labour laws and regulations. Check that your contract complies with legal standards.
  • Communication: Transparency is important in your relationship with an employer. A sign of a positive work culture is when an employer tells you the expectations of your job in simple terms. 

What are the benefits of a fixed-term contract? 

A woman in business attire smiling at another woman

Fixed-term contracts offer a range of benefits for both employers and employees. Let's explore the advantages that make fixed-term employment an appealing option:

  • Flexibility: Fixed-term contracts provide flexibility. They can help employers adjust their workforce to business needs. Fixed-term contracts might be subject to business demands. These can include project deadlines, seasonal fluctuations, or specific events.
  • Earning opportunities: Some fixed-term employees might work for more than one employer. This way of working can help you to diversify your income streams. A graphic designer working for an agency could also take on freelance projects.
  • Valuable experience: Fixed-term contracts can expose you to diverse projects and tasks. This exposure can give you a broad skill set and valuable experience. For example, a content writer may learn more about the world by writing for different industries.
  • Helps to assess long-term commitment: A fixed-term contract can serve as a trial period. It can allow you to assess the company culture. It can also help you to identify work dynamics before committing to a long-term position. 

What are the limitations of a fixed-term contract? 

While fixed-term contracts offer flexibility and opportunities, there are also potential downsides. Here are some limitations of temporary contracts:

  • Job insecurity: Employees on temporary contracts may experience higher levels of job insecurity. This concern is especially true in times of uncertainty about contract renewal.
  • Limited job benefits: While EPF and SOCSO are mandatory for all employees, fixed-term employees may have limited access to comprehensive employment benefits. Decreased benefits can include health insurance, lifestyle allowance, or other perks.
  • Limited career advancement: Fixed-term contracts may limit opportunities for career advancement. You might not have the same access to training, mentorship, or promotion pathways.
  • Limited training opportunities:  Employees on fixed-term contracts may face training limitations. You may have less access to development and training than permanent staff. This could impact skill enhancement and professional growth. 

Terms to look for in your fixed-term employment contract 

Employment contracts can be challenging to examine. Much of the terminology can cause confusion. Here are three common terms to be mindful of when looking at the contract for your next role: 

Job title 

Your job title plays a part in defining your role within an organisation. It can also impact your career trajectory. Here's why it's crucial to ensure alignment between your job title and actual duties: 

Clarity in responsibilities 

Your job title should accurately reflect the scope of your responsibilities. It also should show the level of authority within the organisation. Aligning your job title with your actual duties helps set clear expectations. It eliminates ambiguity and ensures everyone understands your role. 

Career development 

Your job title contributes to your professional identity. It shows how you look within your industry. A precise and descriptive title can enhance your credibility and visibility. This can open doors to future career opportunities. 

An accurate job title reflects the skills, experience, and expertise you bring to the role. It serves as a testament to your accomplishments and bolsters your reputation. This can lead to career advancement opportunities. 

Job description 

A well-crafted job description is crucial for both employers and employees. This provides clarity on roles, responsibilities, and expectations. Here's how to ensure accuracy and seek clarification when needed: 

Detailed roles and responsibilities 

The job description should outline the specific tasks, duties, and responsibilities. This ensures clarity on the expectations of the employer. 

Clarity on expectations 

Provide clear benchmarks for success. This includes defining key performance indicators (KPIs) or metrics. Clarify the reporting relationships within the organisation. This includes who the employee will report to and any direct reports they may have. This helps clarify the lines of communication and accountability. 

Seek clarification on ambiguities 

If there are any ambiguities or uncertainties, don't hesitate to seek clarification. It is okay to approach the hiring manager or HR department with your concerns. Open communication ensures alignment and understanding. 

Prepare a list of questions regarding any unclear aspects of the job description. This can include specific duties, expected outcomes, or growth opportunities. 

Probationary periods 

Man reviewing his employment contract on his laptop

The probationary period is a crucial phase in any contract. It serves as a time to assess compatibility and performance. Here are some key aspects of probationary periods: 

Duration of the probationary period and its impact on job security 

Probationary periods can last between 1 to 6 months. The duration can vary across industries, companies, positions, and seniority. The length of your probation is in your contract or company policies. 

While you're probationary, your job security may be more fluid. Your employer can usually end your employment with shorter notice. Getting through your probationary period usually leads to confirmation of your contracted employment. 

Clarifying expectations, evaluation criteria, and feedback opportunities 

It's important to understand the expectations for your role during this time. Check specific tasks, responsibilities, and performance standards. Ask your manager for the company's criteria for evaluating performance. This information may include key performance indicators (KPIs). Expectations may also include project completion deadlines and adherence to company policies. 

Aligning with your manager on expectations and setting clear KPIs 

Start a discussion with your manager to align your expectations. Ensure you share your understanding of the role, responsibilities, and performance criteria. Communicate and give regular feedback. Ensure that you understand team processes and aim for improvement. 

Common practices for probationary periods 

Here are some common practices that companies use during probationary periods.

  • Probationary period handbook: Many companies have a handbook or guidelines. These provide clarity on expectations, evaluation processes, and potential outcomes.
  • Onboarding: You may have onboarding programs to attend. Probation helps you to become familiar with the company culture and expectations.
  • Regular check-ins: Regular check-ins with your manager promote open communication. Always allow for timely feedback and adjustments.
  • Performance reviews: Mid-probation and end-of-probation performance reviews help you track your progress. Knowing how well you're doing can help you make informed decisions when you join a company.
  • Professional development opportunities: Many companies provide probationers with access to professional development opportunities. Probationary periods support your growth and integration into the company. 

Duration of employment 

When entering into a fixed-term employment contract, it's crucial to have clarity. Make sure you understand the start and end dates of the contract. Here's how to ensure clarity and explore options for renewal or extension: 

Clearly stated contract terms 

The contract must specify the start and end date of the employment. This ensures both the employer and the employee are aware of the duration of the contract. The contract should also outline any probationary period, if applicable. 

Options for renewal or extension 

Some contracts may include a clause that allows for the renewal or extension. This, of course, depends upon mutual agreement between the employer and the employee. This provides flexibility for both parties to continue the employment relationship if desired. 

Employers may also perform evaluations or reviews when the fixed term expires. This is to assess the employee's performance and suitability for renewal or extension. 

Implications of renewal or extension 

The employee may continue to receive the same benefits upon renewal or extensions. This provides job security for the employee, ensuring continuity of employment and income. Contract renewal or extension may present an opportunity for negotiation. This can include salary adjustments, additional benefits, or changes to contractual terms. 

Considerations for contract termination 

The contract should specify the notice period required for termination by either party. This allows for proper transition and planning in the event of contract termination. In some cases, this may include provisions for severance pay or compensation. This is for the event of contract termination before the end date. 

Termination 

Termination is a significant aspect of employment relationships. How employers manage terminations should be clear and fair. They must adhere to legal and ethical standards. Here are some conditions for termination: 

Conditions under which termination can occur 

Here are some common conditions where termination can occur.

  • Performance issues: An employer may end your contract due to poor performance. Performance issues can include failure to meet job expectations or fulfil your responsibilities.
  • Misconduct: Serious violations of company policies can lead to termination. Misconduct can also be due to breaching ethical standards (gross misconduct).
  • Restructuring: Economic factors or downsizing may cause employers to restructure, ending fixed-term or permanent contracts. Restructuring usually aligns with business needs.
  • End of contract or probation: Your employer may let you go at the end of your fixed-term contract. It can also happen at the end of a probationary period. Either of these instances could be due to performance not meeting expectations.
  • Legal reasons: A company may need to end contracts for legal reasons. This could be due to a violation of labour laws or regulatory requirements, for example. 

Notice periods 

Generally, notice periods vary. You can usually find your notice period in your contract. Company policies also include this information. Notice periods often range from 2 weeks to several months. The notice an employer asks for depends on your role, length of service, and local regulations. 

While not specifically addressed in Malaysian labour laws, garden leave can be a common practice in employment contracts.  Some employers may place employees on garden leave during their notice period. Garden leave allows a person to stay away from work while receiving full pay and benefits. 

Potential consequences for the employee 

Here are some consequences of termination:

  • Loss of benefits: Termination may result in the immediate loss of employment benefits. Benefits you may lose include retirement contributions and SOCSO.
  • Impact on reputation: Termination can affect your professional reputation. A poor reputation can affect your future job prospects.
  • Financial implications: When a company terminates employees, people might endure financial challenges. It's important to plan for any transition period to mitigate sudden termination. 

Working arrangements 

Two men in suits in a handshake

Establishing clear working arrangements is crucial for both employers and employees. This ensures productivity and alignment of expectations. Here's why it's essential to understand your working arrangements: 

Defined working hours 

Review your contract or company policies to understand the agreed-upon working hours. This includes your regular workday hours and any designated break periods. 

Clear working hours provide consistency and predictability in your schedule. This can help you plan your day and manage your workload effectively. 

Flexibility in arrangements 

Clarify the expectations and guidelines outlined in the contract or company policies. This is especially important if you can work from home. It is important to understand any specific conditions or requirements. Some employers offer flexibility in working hours. This allows employees to adjust their schedules within certain parameters. 

Expectations and communication 

Regardless of working arrangements, understand the performance expectations set by your employer. Clarify deliverables, deadlines, and communication protocols. This ensures alignment with company goals and objectives. 

Maintain open communication with your manager or supervisor on your working arrangements. If you encounter challenges, discuss them proactively to find mutually beneficial solutions. 

Employee benefits 

In Malaysia, employee benefits for fixed-term contract staff may vary. This depends on the employer and the terms negotiated in the contract. Here's a review of some common practices for employee benefits: 

Health benefits 

Social Security Organization (SOCSO) is a must for fixed-term workers. Employers must register all employees with SOCSO to cover work-related injuries, disabilities, and death benefits. However, benefits like medical, dental, and vision insurance or allowance may vary.  

Leave benefits 

Fixed-term contract employees may receive paid leave benefits. This includes sick leave and annual leave. Employers may also provide maternity and paternity leave benefits, depending on the terms of the contract. 

Bonuses and incentives 

Though not explicitly stated in The Act, it is not uncommon for some employers to offer a completion bonus or end-of-contract bonus. This is to recognize their contributions and achievements during the contract period. 

Retirement benefits 

EPF is mandatory even in fixed-term contracts. Both employer and employee contribute the equivalent of 11-12% of the employee's monthly salary to the employee's retirement savings fund. 

Sick leave 

Sick leave is a crucial aspect of employee benefits. This provides the necessary support for health-related absences. Here's why it's essential to know your entitlements: 

Entitlement to sick leave 

Review your contract to understand your entitlement to sick leave. The contract often outlines the number of sick days allowed per year. It can also include any additional conditions or requirements. 

Malaysia mandates certain minimum entitlements to sick leave for employees. Employees are entitled to 14 days of paid sick leave per year if they have been employed for less than two years, and 18 days if they have been employed for more than two years. This sick leave entitlement is separate from annual leave and is intended to cover periods of illness or injury. It is important to familiarise yourself with these statutory requirements. This ensures compliance and protection of your rights. 

Common practices for sick leave 

Common practice for sick leave in Malaysia is often dependent on the length of employment. Employers may require a medical certificate for sick leave if the absence exceeds two consecutive days, and they are responsible for paying the employee's wages during the sick leave period.  

Paid sick leave is mandatory in Malaysia as it aligns with the statutory requirements of the Employment Act 1955. 

Annual leave 

Man on his laptop reviewing his employment contract

Annual leave is an important aspect of your contract. It provides you with time for rest, rejuvenation, and personal activities. Let's explore the key considerations for annual leave days. 

How many days of annual leave are you entitled to? 

Annual leave entitlement varies across countries, industries, and individual employment contracts. Annual leave days are often subject to how many days you work. In Malaysia, paid annual leave ranges from 8-16 days per year, depending on your length of employment. 

What are common practices for annual leave entitlement? 

Your annual leave entitlement may vary based on your employer's policies and employment contracts. Employers can set limits on the carry forward of annual leave through their company policies or employment contracts. The earned leave entitlement resets to zero on January 1st of each year, and employees will earn their leave as they work throughout the year. If an employee joins midway through the year, their annual leave entitlement will be prorated. Employers can also offer the option to encash unused annual leave, which means that employees can exchange the remaining days of their annual leave entitlement for cash. 

How to negotiate an increase in annual leave days 

Negotiating the terms of your annual leave can be a delicate task. Here are some steps you can take to ease into the negotiation.

  • Research: Understand the typical annual leave practices in your industry and region.
  • Assess: Assess your current workload, job responsibilities, and personal needs. You must be able to justify your request to increase your annual leave.
  • Discuss: Choose an appropriate time to discuss your request. An example might be during a performance review or at contract renewal.
  • Be professional: Frame your request professionally. Emphasise the potential benefits for both you and the employer.
  • Show value: Show how annual leave days improve your productivity and job satisfaction.
  • Explain impact: Stress the importance of adequate rest for employees. Explain how annual leave affects your well-being, mental health, and long-term commitment.
  • Provide solutions: Propose flexible arrangements. You could suggest staggered leave schedules to lessen disruptions to work processes.
  • Communicate: Communicate how your team can manage your responsibilities during your absence. Address any concerns your employer might raise.
  • Compromise: Be open to compromises and alternatives. Show your willingness to find a solution that benefits both parties.
  • Present data: If possible, present data or examples. Highlight how other companies in your industry handle annual leave entitlements. 

Conclusion 

If you're looking for new career opportunities, understanding the details of your employment contract is crucial. Knowing how permanent and fixed-term contracts differ can help you make informed decisions. It's also important to weigh the associated benefits and limitations. Pay attention to the main terms of your contract to help you navigate the twists and turns of your job search. 

Empower yourself with knowledge, negotiate, and approach your professional journey with confidence. 

FAQs 

  1. What are the rights of an employee under a fixed-term contract? 
    ⁠An employee has rights under a fixed-term contract. Employee rights are often the same as for permanent employees. Rights include fair wages, reasonable working hours, and workplace safety. You also have the right to safeguard against unfair termination. 
  2. Can an employee leave a fixed-term contract? 
    ⁠An employee can leave a temporary contract early. This is possible when both parties reach a mutual understanding, or the contract includes early termination. Leaving without proper justification may lead to legal consequences. 
  3. Can a fixed-term contract become permanent? 
    ⁠In some cases, a fixed-term contract may lead to permanent employment. An employer might offer permanent employment when extending or renewing your contract. A permanent job offer can also be due to good performance or business needs. 
  4. What happens when a fixed-term contract ends? 
    ⁠When a fixed-term contract ends, the employment relationship reaches its definite end. The employee may be eligible for any agreed-upon severance or notice period. Both parties are generally free to pursue other opportunities. 
  5. What happens in the case of early termination? 
    ⁠Early termination of a fixed-term contract may have consequences. The contract often outlines items such as penalties or notice periods. Both parties should follow the termination procedures to avoid legal issues. 
  6. What are the remedies for infringement on a fixed-term contract? 
    ⁠Remedies for infringement may include compensation for damages, reinstatement, or other legal options. The outcome depends on the nature of the breach. It's important to seek legal advice in such situations. 
  7. What needs to be in a fixed-term contract? 
    ⁠A fixed-term contract should include details relevant to your employment. Details include the duration of your employment, responsibilities, and compensation. Your contract should also include benefits, termination clauses, and other agreed-upon terms. 
  8. What are the conditions of a fixed-term contract? 
    ⁠The conditions of a fixed-term contract should include the mandatory details of employment. Employment details include job responsibilities, compensation, benefits, and termination clauses. Any other items are usually by mutual agreement. 
  9. Can you negotiate a fixed-term contract? 
    ⁠Yes, fixed-term employment contracts are negotiable. You can discuss the contract with your employer and negotiate terms. Discuss your salary, benefits, working hours, and other components, before finalising the contract. 
  10. What are the disadvantages of a fixed-term contract? 
    ⁠Job insecurity can be a major disadvantage of fixed-term employment contracts. Disadvantages also include limited access to some benefits and less financial stability. Employers may face challenges in workforce planning and potential legal issues.

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