The shift from permanent to contract jobs

The trend of contract jobs is picking up at a rapid pace and is changing the way people get hired to work. 
As employers seek to cut their labour costs and get the flexibility to staff up and down, demand for contingent workers is rising.

Companies across various sectors of the economy, are leaning more on contract workers than permanent ones. 
But some companies are increasingly facing legal disputes arising from mistakes in implementing contractual obligations rightly.

Two years ago, Susan Nambi (not real name) one of the employees in a big healthcare organisation within Kampala, was engaged on a fixed term renewable contract of two years that would expire on January 31, 2023. 

A month prior to the contract end date, she was given a notice of end of contract, which directed her to hand over and clear with the organisation and exit by January 31, 2023. 

When Nambi requested to know why her contract would not be renewed, she was informed by her manager that she was not performing well and that her performance had become of concern to the organisation. 

She cited that she has never been informed of this poor performance. In fact, her performance evaluations previously on file indicated records of good performance. So, she appealed and noted that she would sue the employer if she was not given a fair termination process.

In addition, her employer continued to pay her February 2023 salary as her case underwent review by the appeals committee. 

The appeals committee has advised the organisation that since there is no record of poor performance on file through Susan’s tenure of service, it is a very high-risk situation for the employer and any unfair action against Nambi such as non-renewal or termination of her contract at this moment is likely to cost very huge legal costs for the organisation, but also reputational risk.

The employer decided to renew Nambi’s contract on exactly the same terms and conditions of service which she enjoyed as a regular fixed term employee.

This is one of the few contractual issues that employees and employers are battling.
Mr Denis Kakembo, an attorney from Cristal Advocates, says a fixed term contract is one where the duration of employment is known. Many of the times when you enter into an employment relationship, you know the point of start but you don’t know the point of end. 

He says for the fixed term, you know that you have a contract that starts from June 1 and terminates on December 31.

Preference for fixed term contracts
Some employers these days prefer fixed term contracts. 

“In the legal space, one of the most litigated matters is employment and within employment, the most litigated matter is time when an employment relationship ends. Chances are that the employee is going to run to the labour office and the matter ends up being referred to the labour court,” Mr Kakembo says.
“The major issue that normally comes up is when the employment relationship was ending, did it end fairly and justly?” he says. 

According to Mr Kakembo,  these harsh economic times have pushed several employees to rationalise resources for a fixed period of time, even for manpower planning. The employer knows that at this time of the year, this is the amount of money I have for this particular role. 

A fixed term employment contract just serves that purpose for project related works. So you can also have a fixed term employment contract, when you have a short cover. 

Maybe when your staff are on maternity leave, some of your staff are sick or when some have gone for study leave. So you fill in for them through signing fixed term contracts.

Mr Kakembo explains that psychologically, when you have an open ended contract you may relax as an employee. But here you are having a fixed term contract which can be renewed subject to performance which keeps the employee in check.

That this is a benefit for both, the employer gets the best out of you in terms of performance but also you are sure that if you perform well, your contract is going to be renewed. For the fixed term contract, there is no probationary period as long as you are hired you start to work immediately until the time elapses. There is no testing you as to whether you are fit for the purpose.

If the time for the fixed term relationship has not elapsed but either of you (employer and employee) would like to step out, there is what is called ending it by way of notice. It can be like a week’s notice from the employer to the employee or vice versa.

Mistakes employers make 
Mr Kakembo says employers may not keep track of when the contract expires, for example the contract expires on December 31, but the next month the employee still comes for work, and the employer continues giving them work and no one is following up to see what the contract says.

“Under the law when the contract expires but within a week, you do not notify the other party, that you are not going to renew the contract and the person continues to work, the presumption is that you have now taken on this person on a permanent basis,” Mr Kakembo says.

He explains that as an employer if you turn around and suggest that please leave, you can be challenged as a result of that. That is an issue employers sometimes miss instances when the employer says this contract is going to be renewed subject to performance or evaluation.

“May be in the first year, you did an evaluation and the contract was renewed and in the second year you did not follow that process. Due to what happened in the first year, you will have created a legitimate expectation on the part of the employee that last time my contract was renewed we did an evaluation and probably in the second year that is what should happen,” Mr Kakembo says.

He added that those contracts which are renewed subject to evaluation if not handled well, the employer may find themselves in a pit  whereby even though you say the contract has elapsed, an employee still challenges that and  you will part with some money. 

Terminating fixed term contracts
Fixed-term employment contracts, however, normally set out how the relationship can be ended early. It is common to include the requirement for notice should either party seek to end early the employment relationship before it contractually lapses. In this case, one must give advance notice of the intention to terminate the contract or make a payment in lieu of the notice period agreed upon if the contract is to terminate immediately.

Uganda’s Employment Act provides that a fixed-term contract is treated as extinguished if it is not renewed within a period of one week from the date of expiry. Fixed-term contracts may also provide for a possibility of renewal. 

The High Court also rules that employee appraisals should be conducted in accordance with standards and set timelines and the absence thereof subjects decisions on non-renewal to concerns over unfairness, arbitrariness, and procedural impropriety which have costed various companies, huge sums of money, as well as reputational losses.

No probation for fixed term contracts
Mr Denis Kakembo, an attorney from Cristal Advocates, says there is also a probationary contract. Usually when you sign up for work, the contract that is offered to you if it is not fixed, they may tell you that three months is a probationary period but that probation must not exceed six months If you perform well you are going to be confirmed.

“However, if it exceeds six months, subject to you agreeing with the employer it can be renewed for a further period of not exceeding six months.  Its got to be mutual and consensual  and that usually works with the non fixed contract.

For the fixed there is no probationary period as long as you are hired you start to work immediately until the time elapses. There is no testing you as to whether you are fit for the purpose,” Mr Kakembo says.

Mr Kakembo says when you go to a non fixed or a permanent contract the durations within which you can end an employment relationship are not entirely determined by the contract.But if you have may be an organisational manual, that manual must conform to the law.

For instance, if you have worked for someone for a year, it is expected that if the employer wants you to leave the work, they must give you two weeks of notice .If you have worked for more than a  year or five years, it has got to be a year notice. If you have worked between five to 10 years, it becomes two years or more.
Explaining that in the employment relationship many of the times, for a non fixed contract, many of those requirements are not complied with. 

At the time of firing someone, people act with emotions as opposed to conformity with the law.
You find that someone comes and fires you at the spur of the moment, without thinking that they have to comply with the law. 

As the employer, you need to recall for how long someone has worked with you, there is that difference. For a fixed term contract, you know the notice or its contractually set out or when the time elapses. For the non fixed, you have to comply with the time the law sets out.

More to that, Mr Kakembo says there is also “summary dismissal.”
When you commit a fundamental breach of your right to perform work, the employer is entitled summarily let you go either by giving you less notice or giving you no notice at all. However, that must be done with conformity with in the law. 

He notes that here you must conduct a hearing or a disciplinary process is set with a lot of challenges .Any employee can allege bias, that the termination was not conducted well.

He says that it becomes harder when you are going to terminate someone with a non fixed contract. Yet for a fixed contract if you see that firing someone summarily is likely to escalate through adjudication you can choose to see out the contract, that is you wait for them to finish their contract but you do not renew it.

That employers are choosing fixed term contracts to avoid headaches by managing compliance with the law. You would not wish to be an employer who always ends up in the news or courts of law that burns down your reputation. 

He added that there are areas of contention or concern under a fixed contract. 
Some of those issues might arise where the contract is not well-drafted.

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