Changes in how employers may use consecutive fixed-term and replacement contracts

At a glance

• On 8 May 2023, a new article of the 1978 Act on Employment Contracts entered into force.
• The new article introduces rules on combining consecutive fixed-term contracts and replacement contracts.

Previous rules on fixed term contracts

Since 1998, the 1978 Act on Employment Contracts has stipulated that an employee can sign a maximum of four consecutive fixed-term contracts. Each fixed-term contract should last at least three months and the sum of all contracts can be two years at most.

If the social inspection agrees in advance, employees can sign up to six consecutive fixed-term contracts. That is if each contract lasts at least six months and the total duration of the consecutive fixed-term contracts is no more than three years.

Similarly, since 1985, the 1978 Act on Employment Contracts has stipulated that consecutive replacement contracts can last at most two years. If this threshold is exceeded, the employment contract is deemed to be an employment contract of undefined duration.

But there was a loophole in the legislation. There were restrictions on using consecutive fixed-term contracts and on using replacement contracts. But there were no rules on combining them.

So, if parties signed four consecutive fixed-term contracts, with a minimum of three months per contract and a maximum of two years for the total duration of all contracts, they could then sign a replacement contract. After that they could restart a cycle of four consecutive fixed-term contracts. The first fixed-term contract of the second cycle came after a replacement contract, so it wasn’t a consecutive fixed-term contract.

In its judgement of 17 June 2021, the Constitutional Court held that having no rules on combining consecutive fixed-term contracts and replacement contracts was contrary to the principle of equality stipulated in the Constitution.

The legislator’s aim was to ensure that, after a certain period, an employee was given an employment contract of undefined duration. So there was no objective justification this aim being circumvented by signing a combination of fixed-term contracts and replacement contracts.

What's changed?

The new rule provides that a combination of consecutive fixed-term contracts and replacement contract can, in principle, last two years at most.

But there’s an exception if the parties first sign consecutive fixed-term contracts, followed by a replacement contract. The total duration of all contracts cannot exceed three years.

So, if an employer planned four consecutive fixed-term contracts with a total duration of maximum two years, but the employee is to be replaced when the fourth fixed-term contract ends, the employer can sign a replacement contract with the employee, if the total duration of all contracts is not more than three years.

Both fixed-term contracts and a replacement contracts should be agreed in writing before they enter into force.