Considerations for Deciding on Fixed-term vs Indefinite-term Employment Agreements
Overview
Our recommendation is to use finite term employment agreements for short-term or precarious employment scenarios and indefinite term agreements for all career track roles. There is however a risk/reward trade-off to be considered. To that end, here are the major considerations.
1. Recruiting and Retention
People strongly value the security and inclusiveness of indefinite term arrangements. If it is a long-term, career oriented position (all else being equal) the odds are that an offer with indefinite term will attract better candidates and retain them longer.
2. Severance / Termination Costs
These costs are the same for both scenarios except at the exact time that a finite term agreement expires (when they amount to $0). With the Employee Agreement wording MQL uses, these costs are minimized in either scenario.
3. Risk of a Duty to Accommodate / WSIB Claim Scenario
These scenarios include when an Employee has a physical or mental impediment to working their regular role. Since the Employer has a strong duty to accommodate such limitations, and it can result in significant hardship on a small firm, the finite term arrangement puts an automatic end date on the employment.
4. Compensation
Finite terms often include a premium in pay to offset fewer Employee Benefits, and the relative precariousness of the arrangement.