Fixed-term or open-ended contract, how to choose?

The open-ended contract remains the classic contractual form favoured by the legislator. However, there are a number of reasons why a fixed-term contract may be used. These reasons may vary according to the specific needs of the company. An atypical form of contract has also recently resurfaced in case law: the open-ended contract with a fixed term.

The traditional distinction: open-ended vs fixed-term contracts

An open-ended contract is, as its name suggests, a contract that does not specify a time limit.
A fixed-term contract is a contract that specifies a fixed date or an event that must occur on a known date, after which the parties will be released from their obligations. There is also another time-limited contract whose terms and conditions are very similar to the classic fixed-term contract: the employment contract for a well-defined job. 

Here are some of the most important consequences of a fixed-term contract:
1. Formal requirements: A fixed-term contract must be concluded in writing at the latest when the employee starts work. If it is not in writing, the contract is subject to the rules governing open-ended contracts.
2. Early termination: The contract may be terminated early, subject to a period of notice or compensation in lieu of notice, for the first half of the term of the contract (which may not exceed 6 months). After this period, the fixed-term contract may only be terminated subject to payment of compensation in lieu of notice. This compensation is equal to the amount of remuneration that would have been due until the end of the contract, up to a maximum of double the compensation in lieu of notice applicable in the case of a permanent contract.
3. Succession of fixed-term contracts: the conclusion of successive fixed-term contracts requires compliance with restrictive rules relating in particular to the duration and reasons for the succession. Failure to comply with these rules will result in the fixed-term contract being reclassified as an open-ended contract.

Reasons for opting for a fixed-term contract

There are a number of situations that might encourage the parties to enter into a fixed-term contract rather than an open-ended contract. Here are a few examples:
• the company needs employees for a specific project, such as an event, a consultancy assignment, the development of an application, a particular project, specific research, etc.;
• the employee is looking for a certain amount of experience before taking on another project;
• an exceptional increase in demand requires a temporary expansion of a team;
• the parties do not wish to make a commitment for an indefinite period in the first instance, but prefer an initial experience, after which they will assess whether to extend the collaboration for an indefinite period.

What about open-ended contracts with a fixed term?

It has long been accepted by case law that an open-ended contract can have a fixed term, i.e. a clause stipulating that the contract will end on a date set by the parties without notice or compensation. Before that date, the contract may be terminated by either party in accordance with the rules governing open-ended contracts. This type of contract is becoming increasingly common in practice. A recent ruling by the Liège Labour Court confirms that no legitimate reason is required to use this form of contract. However, we strongly recommend that you specify the reason in the preamble to the contract, so that you can demonstrate that it is not being used to circumvent the notice period or avoid payment of compensation in lieu of notice.

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