What is limited-term employment?

With the rise of remote and hybrid work setups, employers seek to hire talent from a large pool of individuals.

One of the factors to take into consideration is the duration of this employment agreement. 

It may not always end in a long-term setup and will eventually come to an end. This is called limited-term employment. 

Find out more about this arrangement and what it means for your company.

Limited-term employment explained

Limited-term employment, also known as fixed-term employment, is a type of agreement where both the employer and employee agree on a fixed end date. The employee will work for the employer until the specified end date on the contract. 

After that, the company can choose to renew, extend, or terminate the employment relationship. 

Many outsourcing firms operate on similar kinds of models, such as Outsourced. Good performance of the offshore staff generally leads to continuity of the working partnership.

However, the contract cannot be terminated before the specified date.

Limited-term employment vs. Indefinite contract

The main difference between limited-term employment and indefinite contracts is that the latter has no fixed employment end date.

Indefinite contracts allow employees to work for an indefinite period, meaning as long as possible. Limited-term employees have shorter employment periods than indefinite contracts.

Despite that, one similarity is that both are entitled to the same benefits, such as health insurance, paid time off, and government benefits.

How long does limited-term employment last?

Limited-term employment lasts until the specified end date on the contract. It also depends on the length of a certain project for which the employer hired that employee.

For example, an employer can hire an employee to work on a project that spans six months, from January 1st until July 1st.

However, it also depends on the employee’s country of residence, as each has varying laws regarding permitted hours per week, duration in months, or job types.

For example, if you are hiring employees from the Philippines, make sure to follow Philippine work hours, jobs, and rates to avoid compliance issues.

Benefits of limited-term employment

Even though some may be weary about the inevitable end of limited-term employment, there are some benefits that come with it.

Defined contract length

Having a set start and end date of employment is actually a convenient thing to have. It serves as a boundary for employers who do not want to commit to a long-term job.

Additionally, fixed contracts are handy for short-term projects and immediate needs, such as one-time events or specific projects. If the employers want to continue this relationship, they can always choose to renew or extend the contract.

Flexible staffing

Companies can use limited-term contracts as a trial period for potential, long-term employees. They get to work with several individuals to see who the best fit is for the company.

In the event of a staffing shortage due to leaves or holidays, limited-term employees can fill in for these individuals until they return.

This ensures that there is still enough manpower to accomplish work-related tasks and tend to the customers’ needs despite the lack of employees.

Global expansion

Limited-term employment gives you access to a wider, global talent pool, which can bring fresh, new perspectives to the market. This ultimately gives you an advantage over your competitors.

You can work with regional experts who can give you insight into what kind of market you plan to expand to. This is advantageous if you are working on an international project.

For example, if you are a US-based company with a project based in the Philippines, having a Filipino as your contact person will help make the process easier.

When to use limited-term employment

Limited-term employment is an ideal option for several scenarios. Listed below are some examples:

Seasonal work

Limited-term employment is a convenient way to hire seasonal employees.

During holidays like Christmas or peak season, such as summer or winter, businesses will have more customers and require additional staff to accommodate all of them.

Employers or managers can hire employees under a fixed contract to assist during these busy times.

Budget constraints

Some companies do not have the financial resources to accommodate full-time employees. Therefore, fixed-term employees are the perfect, cost-effective alternative.

Even though limited-term employees receive the same salary and benefits as full-timers, managers can relax knowing that it is only temporary and with no long-term commitment.

Special projects or events

If you are handling a project or event that requires more manpower, consider hiring limited staff to provide you with additional help.

You can hire additional staff to work for the duration of that project or event to help with planning, marketing, or event coverage.

Ensuring compliant limited-term employment

Limited-term employment is an effective, short-term plan that allows you to streamline operations without worrying about long-term costs.

Companies reap the same benefits of having full-time employees despite being only temporary.  They have access to talent from all over the world and ensure that business is always running.