Fixed-term contract

A fixed-term contract is an employment agreement that ends on a defined date or completed task, capped by statute in most jurisdictions.

For global payroll teams, the fixed-term contract is the exception every European market treats as the exception. The indefinite contract is the default; the fixed-term form needs a statutory ground, a maximum duration, and a renewal limit, and breaches convert the contract to indefinite by operation of law.

The label maps to the French contrat à durée déterminée (CDD), the German befristeter Arbeitsvertrag, the Italian contratto a tempo determinato, and the Spanish contrato temporal.

The trade-off the global headcount plan almost always gets wrong is treating the fixed-term form as a budgeting convenience. The cap arithmetic is where buyers most often miscount, and the carry-forward exposure on a silent conversion runs from the original start date, not the renewal date.

What does the fixed-term contract mean in payroll?

In payroll, the fixed-term contract is the transaction code that runs ordinary gross-to-net while carrying a parallel accrual stack for the end-of-contract obligations the statute attaches.

The statutory ground every FTC needs on day one

Most EU markets require the contract to cite a permitted statutory ground at signature. France requires a motif de recours under L1242-2; Germany requires either a sachlicher Grund under TzBfG §14(1) or a clean sachgrundlos declaration under §14(2); Spain narrowed permitted grounds in 2021 to production circumstances and substitution.

No ground or the wrong ground produces an indefinite contract on demand. The contract gets rewritten by the tribunal, not the employer.

The accrual stack payroll has to carry

FTC payroll runs ordinary employer social contributions and statutory accrual alongside two end-of-contract obligations.

France adds the indemnité de précarité at 10% of total gross paid under L1243-8. Spain adds 12 days per year of service in statutory severance on lawful expiry. Italy charges an additional 1.4% contribution on FTC gross to fund unemployment insurance. The end-of-contract line is paid even on lawful expiry.

The conversion-risk reserve most models miss

Every FTC carries a contingent indefinite liability. Breach the duration cap, the renewal count, or the statutory ground, and the carry-forward severance, notice, and benefits accrual runs from day one of the original contract.

The reserve is the difference between the budgeted FTC line and the realised CDI line, and the model that omits it under-prices every multi-year FTC engagement in markets with auto-conversion.

How do duration caps and renewal limits compare across countries?

Each market measures duration differently and treats renewals differently. The same employee profile produces wildly different conversion risk across the footprint.

The variation hurts. A renewal routine in the UK becomes a permanent contract in France on month 19; a renewal legal in Germany triggers requalification damages in Spain. The fixed-term framing changes the contract, not the on-cost rate that runs through URSSAF in France or Sozialversicherung in Germany.

The 2021 Spanish reform is the move buyers under-price most often. Real Decreto-ley 32/2021 closed the former contrato por obra o servicio determinado and narrowed available grounds; Spain is now the strictest major EU market on this question.

When does a fixed-term contract convert to indefinite?

Conversion happens by operation of law when the statutory cap on duration, renewals, or ground breaks. The contract rewrites itself; no fresh document is signed.

The trap is timing. Conversion happens quietly: the renewal letter goes out, the worker keeps working, and the next exit or audit surfaces it. By then the carry-forward severance, notice, and benefits accrual runs from day one of the original contract.

Italian, German, and French case law all read silent renewals as continuing the original relationship. See the indefinite contract entry for the protections that attach after conversion.

What is the employer actually liable for at FTC end?

Three exposures run in parallel on every FTC: mandatory severance or precarity bonus on legitimate expiry, requalification damages if the contract breaches statutory grounds, and back-pay across the period the contract was held on the wrong basis.

In France, expiry of a valid CDD triggers the indemnité de précarité at 10% of total gross paid under L1243-8, plus paid-annual-leave indemnity. The bonus is not owed if the contract converts to a CDI or the worker refuses a CDI offer on equivalent terms.

Breach of motif or cap adds an indemnité de requalification of at least one month's salary under L1245-2, on top of CDI back-pay if the case reaches a conseil de prud'hommes. On a €60,000 Paris one-year contract, combined exposure runs roughly €6,000 precarity plus a €5,000 requalification floor before back-pay.

Germany has no statutory FTC severance, but a contract breaching TzBfG §14 produces an unbefristet contract by force of §16. The worker can sue for permanent reinstatement (Entfristungsklage) within three weeks of the agreed end date under §17.

Once the contract is treated as indefinite, full Kündigungsschutzgesetz protection applies retroactively at 15-plus employees.

Spain's post-2021 regime adds 12 days per year of service in statutory severance on lawful expiry, alongside €1,000-€10,000 per worker in administrative sanctions for unlawful FTCs under the Ley sobre Infracciones y Sanciones en el Orden Social.

The trap is identical across markets: a renewal that quietly crosses the cap rewrites the file as permanent, with a litigation date attached.

What does an EOR handle on a fixed-term placement?

An EOR is the legal employer for any worker placed through it, so the EOR signs and carries the local FTC. The operational question is which clauses the EOR drafts, which renewal count it polices, and where requalification risk sits if the cap breaks.

Provider posture diverges in three places. Some platforms quote a standard FTC product (12-month or 18-month France CDD) and pass requalification risk back to the buyer through indemnity carve-outs. Others flag conversion risk proactively and route the placement to an indefinite contract with a defined initial term.

A third group leaves the renewal count to the buyer entirely. The best European EOR providers comparison ranks clause-drafting depth and renewal-monitoring workflow, not headline FTC price.

Fixed-term contract FAQs

Does a probationary period count toward the fixed-term cap?

Yes in most jurisdictions. France treats the période d'essai as part of the CDD, so months count toward the 18-month cap from day one.

Germany counts the Probezeit inside the TzBfG window. The probationary period changes the termination route during the trial, not the duration arithmetic that governs cap and renewal limits.

What is the indemnité de précarité in France?

The end-of-contract bonus owed on expiry of a French CDD, set at 10% of total gross paid under Code du travail L1243-8.

It is not owed if the contract converts to a CDI, if the worker refuses a CDI offer on equivalent terms, or for seasonal and policy-led contracts listed in L1243-10. Payroll has to accrue the line monthly, not pay it as a one-off.

Does an EOR remove fixed-term requalification risk?

Not fully. An EOR carries requalification, indemnity, and back-pay risk on its own books only to the extent the master services agreement covers it.

Indemnity carve-outs commonly return the exposure to the client when the cap breaks. The client still has to supply an accurate statutory ground, and many EORs default to indefinite contracts in jurisdictions where the FTC framework is hostile. See the EOR compliance entry for the indemnity-scope reading.

Can the UK use fixed-term contracts without a cap?

Yes. The UK has no statutory cap on fixed-term contract duration.

The Fixed-term Employees Regulations 2002 give workers a right to convert to indefinite after four years of successive fixed-term contracts on request, but the underlying contract continues unless the worker exercises the right. Unfair-dismissal rights vest at 24 months of continuous service regardless of contract form.

What happens if the statutory ground is wrong on a French CDD?

The contract is requalified to a CDI on demand at the conseil de prud'hommes under L1245-1.

The worker becomes entitled to indefinite contract protections backdated to the original start, plus an indemnité de requalification of at least one month's salary under L1245-2. The indemnité de précarité may still be owed in parallel; the two payments are not mutually exclusive.