Hiring In Canada: Fixed-Term vs. Indefinite Employment Contracts and Other Need-to-Knows

If you're planning to expand your business into the Canadian market, this is an exciting and transformative time for your organization! Before making an offer, you might find yourself navigating the complexities of Canada's employment laws. 

Many U.S. based companies are unaware of the limitations set out in Canada’s Employment Standards, which vary by province. It can be easy to get caught off guard when trying to end an engagement with a fixed-term contract early due to the difficulties of terminating fixed-term employment contracts prior to their natural end date. The topic of fixed-term vs. indefinite employment contracts can be confusing, but TCWGlobal is here to help guide you through this new business venture. We want to ensure we partner with you to provide knowledge and tools for ultimate success!  

Quick Overview: 

1. When determining which contract is right for your business needs, here are a few important questions to ask
2. Pulse Check

When determining which contract is right for your business needs, here are a few important questions to ask:  

#1 What is the true nature of the engagement?  

Fixed-term employment contracts should be used in situations where the job that is being performed is genuinely temporary. Examples of this may include: a summer or semester-long internship program, a specific project with a defined beginning and end that you need completed, a temporary role replacing an employe on leave. In such cases, a fixed-term contract is a great option for your short-term needs.  

If you aren’t sure how long the project will last or if there’s a potential for continuous extensions, an indefinite contract is a better option for you. Indefinite employment contracts give our clients more flexibility by allowing you to keep your workers onboarded for as long as needed without the requirement of notice periods beyond the statutory minimums and the costly severance agreements associated with terminating a fixed-term contract early. 

#2 How can I end a fixed-term contract early? 

If you feel that a fixed-term employment contract is appropriate for your company’s needs, you may want an enforceable way to end the agreement early. This can be tricky when you take into consideration case law and common law in each province. 

To cover your bases, the employment contract should include an early termination notice period in an amount that is over and above the minimum requirements set in the Employment Standards Act in each province. The minimum statutory notice periods range from 1-8 weeks, depending on the province and the worker’s length of service.  

To terminate a fixed-term contract early, the contractual early termination notice period can be up to 8-10 weeks or longer as an alternative to paying the remaining duration of the fixed-term period. Even with the extended notice period, the court may view a short notice period as unreasonable, creating a greater liability for the company. Luckily for you, TCWGlobal’s team of experts in Canadian employment is here to help you determine an appropriate amount of notice that mitigates these risks for your company! 

#3 What else should I know up front? 

• Fixed-term contracts naturally expire on the termination date, but if your worker continues to work beyond that date without an amendment to their contract, they will automatically become an indefinite worker. This means that you will need to follow the minimum requirements for notice periods set out in your worker’s provincial Employment Standards Act. 
• Each province has their own minimum notice period requirements, ranging from 1-8 weeks depending on the province and the worker’s tenure. By providing this notice period or payment in lieu of notice when your worker is on an indefinite employment contract, you can compliantly end the engagement when your business needs are met. 
• While some companies prefer to use fixed-term contracts for internal budgeting purposes, you may be on the hook for paying the full duration of the contract term if you haven’t prepared in advance and need to end the engagement early. If this is true for your organization, TCWGlobal can help take the burden off you by including an anticipated end date in our Staffing Nation software for tracking, even with an indefinite contract. Then, when the time comes, if the company would like to end the engagement, we will follow the statutory notice periods and offboard your worker on an indefinite employment contract. However, if the business needs have changed, the anticipated end date can change, too (without any updates to the indefinite contract). TCWGlobal can help navigate you through any internal processes that may be required and help offer compliant solutions that will work for all parties! 
  

Pulse Check! 

How are you feeling after reading this article? Do you feel confident in knowing which type of contract is right for your worker, or do you have more questions for us? If you’re still feeling unsure, let’s book a call! We love meeting with our clients to hear your thoughts, concerns, and ideas, and we want to ensure all of your needs are met. Managing a global workforce can feel stressful, but that’s why TCWGlobal is here for YOU! Reach out to your TCWGlobal Support team or hello@tcwglobal.com for any questions so we may help.