Fixed term contracts, also known as temporary contracts, are a common practice among companies worldwide. These types of contracts are typically offered to employees for a specific duration of time, usually up to a year or shorter. But why do companies choose to offer fixed term contracts instead of permanent contracts?
Here are some reasons why:
1. Flexibility
One of the most common reasons that companies offer fixed term contracts is to have more flexibility. By hiring an employee for a set period, companies can adjust their workforce according to their needs, without making a long-term commitment. For example, if a company has a busy period approaching, they may need extra workers to help with the workload. A fixed term contract allows them to hire additional staff for the duration of the busy period and terminate their employment when things slow down.
2. Trial Periods
Another reason companies offer fixed term contracts is to use them as a trial period for new employees. By giving a new hire a fixed term contract, the company can assess their performance without committing to a permanent contract. It allows them to evaluate the employee’s abilities, work ethic, and fit within the company culture. If the employee performs well and aligns with the company`s values, there is a good chance they will be offered a permanent contract.
3. Cost-Effective
Fixed term contracts can be a cost-effective way for companies to manage their budgets. When it comes to hiring staff, there are typically additional costs involved beyond just the salary, such as benefits and training. By hiring employees on a fixed term contract, companies can limit these costs and avoid additional expenses associated with permanent employees.
4. Project-Based Work
For companies that work on project-based work, fixed term contracts can be an ideal solution. Once the project is complete, the contract can end, and the employee can move on to their next role. It allows companies to bring in specialists for specific projects without committing to a permanent contract.
In conclusion, fixed term contracts offer companies the flexibility, cost-effectiveness, and agility they need to manage their workforce successfully. While permanent contracts have their advantages, fixed term contracts provide a more practical solution for employers with rapidly changing needs or those who need to evaluate new hires without risking a long-term commitment.
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