Fixed-term employment contract: the rules

Fixed-term employment is a firm part of the Danish labour market. Companies use it for maternity cover, seasonal work, project staff and temporary peaks in workload. But a fixed-term employment contract is not just a shorter version of a permanent contract, as there are special rules, requirements and limitations that both employers and employees should know.

This guide reviews what you need to know about fixed-term employment in Denmark: when it is lawful, what the contract must contain, which rights the employee has, and what happens on expiry or renewal.

What is fixed-term employment?

Fixed-term employment is employment that ends at a pre-agreed time, either on a specific date or on the completion of a specific event (for example when a maternity substitute returns, or when a project is finished).

Unlike permanent employment, which can only be brought to an end by notice, fixed-term employment ends automatically on the expiry of the contract without further notice from either party, unless otherwise agreed.

The legal basis

The rules on fixed-term employment are primarily governed by the Act on fixed-term employment, which implements EU Directive 1999/70/EC. The Act's central principle is that fixed-term employees may not be treated less favourably than comparable permanent employees, unless there is an objective ground for it.

In addition, the Salaried Employees Act, the Holiday Act, the Equal Treatment Act and any collective agreements apply, depending on the industry and position.

Can you freely hire on a fixed-term basis?

Yes. There is as a rule no condition of a special ground for entering into a single fixed-term employment. The parties can freely agree that an employment is fixed-term.

It is instead on the renewal of several successive fixed-term employments that the law sets requirements. Typical situations where fixed-term employment is used are:

• Maternity cover: temporary cover for an employee on maternity leave, other leave or sick leave
• Project employment: a fixed-term task with a defined end date
• Seasonal work: work limited to a particular time of year
• Hiring recent graduates for a defined period

What should a fixed-term employment contract contain?

A fixed-term employment contract must meet the same basic requirements as a permanent contract under the Act on employment certificates. In addition to the general information requirements, the contract should contain:

1. The start and end date (or a condition for ending). It must be clear when the employment begins and ends. If the end date is conditional on an event (for example a maternity substitute returning), it must be described precisely.

2. A statement that the employment is fixed-term and what justifies the fixed term. This gives clarity for both parties and is especially important if the employment is later to be renewed.

3. Duties and position, described at the same detailed level as in a permanent contract.

4. Pay and supplements. State the pay, supplements, pension and other benefits. Remember that fixed-term employees have the right to the same terms as comparable permanent employees, unless a difference is objectively justified.

5. Working hours. State whether it is full-time or part-time, the weekly hours and any flexibility.

6. Termination before expiry. Even though the contract ends automatically on expiry, it should be regulated whether and how the employment can be terminated early.

7. Probation. A fixed-term contract can include a probation period, but it should be in reasonable proportion to the total employment period. For salaried employees, probation can also be at most 3 months.

8. Pay during illness and maternity, and holiday. Fixed-term employees as a rule have the same rights as permanent employees, depending on the length of the employment and any agreements.

Fixed-term employees' rights

The equal treatment principle

Fixed-term employees have the right to the same basic terms as comparable permanent employees. This means, among other things:

• The same pay, pro rata for part-time
• Access to the same benefits (pension, staff benefits, training)
• The same protection against discrimination

An employer can only depart from equal treatment if there is an objective ground, for example that a benefit requires a seniority the fixed-term employee has not yet reached.

Information about vacant permanent positions

The employer must inform fixed-term employees about vacant permanent positions in the company in an appropriate way, typically via a notice on the intranet or noticeboard.

Seniority and dismissal protection

Seniority accrues in the same way as for permanent employees. If the employment lasts more than a year, a salaried employee can, among other things, gain protection against unfair dismissal under section 2b of the Salaried Employees Act.

Holiday and holiday pay

Fixed-term employees accrue holiday under the Holiday Act in the same way as permanent employees. Holiday pay is 12.5% of the salary.

Renewal and successive fixed-term employments

One of the most important rules concerns the renewal of fixed-term contracts. The purpose is to prevent employers from circumventing the protection of permanent employment by renewing short contracts indefinitely.

When is a renewal lawful?

Under the Act on fixed-term employment (section 5), several successive fixed-term employments can only be renewed if the renewal is justified by objective circumstances. For example: a maternity substitute can be employed on a new fixed-term contract if a new period of leave arises, but not simply because the employer wants to keep the flexibility.

The risk of permanent employment

If a fixed-term employment is renewed repeatedly without an objective justification, the courts can find that it is in reality open-ended (permanent) employment, and the employee gets the resulting rights, including a notice period.

Termination of a fixed-term contract

Automatic ending

A fixed-term contract ends automatically on expiry, without a notice being required. It is, however, good practice to remind the employee that the employment is expiring, especially for longer employments.

Termination before expiry

If the employer wants to end the employment before the contract expires, it requires grounds for dismissal and observing the notice period, unless a right to terminate early has been agreed. If no right to terminate has been agreed, the employee may, depending on the circumstances, be entitled to pay for the remaining part of the contract period.

Summary dismissal

Summary dismissal (immediate termination for gross breach) applies on the same terms as for permanent employees.

Common mistakes in fixed-term contracts

1. An unclear end date or condition for ending. If it is not clear when the employment ends, a dispute can arise about whether the employment is in reality open-ended.

2. Too long a probation. A 3-month probation in a 4-month employment is disproportionate and can be set aside.

3. No regulation of termination before expiry. If the contract does not address early termination, the employee may be entitled to pay for the whole period.

4. Unlawful renewal. Renewing a fixed-term contract without an objective justification is the classic mistake that can end with the employment being regarded as permanent.

5. Worse terms than permanent staff. Excluding fixed-term employees from bonus or pension schemes without an objective ground breaches the equal treatment principle.

Fixed-term vs. permanent employment

Aspect	Permanent employment	Fixed-term
Ending	Requires notice	Automatic on expiry
Terms	Full	The same, pro rata for part-time
Notice period	Yes	Only on early termination
First employment	Free	Free (no special ground required)
Renewal	Not relevant	Requires objective circumstances

Frequently asked questions

Does there have to be a special ground to hire on a fixed-term basis?

No, not for the first fixed-term employment. It can be agreed freely. It is on the renewal of several successive fixed-term employments that objective circumstances are required.

Can a fixed-term employee be dismissed before the contract expires?

Yes, but it requires grounds for dismissal (notice) or gross breach (summary dismissal). On early termination, the employee may be entitled to a notice period or pay for the period, depending on what has been agreed.

Is a fixed-term employee entitled to a severance payment?

Section 2a of the Salaried Employees Act gives the right to a severance payment of 1 month's pay after 12 years of employment and 3 months' pay after 17 years. The rule in principle also applies to fixed-term employees, but the relatively short employment means the conditions are rarely met in practice.

What happens if the permanent employee does not return from leave?

If the permanent employee extends their leave, the cover can be extended correspondingly with a new fixed-term contract justified by the continued absence. If the permanent employee never returns, you should seek legal advice on the right approach.

Must the contract be signed before the employee starts?

Under the Act on employment certificates, the essential terms must be stated no later than 7 calendar days after work has started, and the rest no later than 1 month after. It is, however, recommended to have the contract signed before the employee starts.

Conclusion

Fixed-term employment is a legitimate and practical tool on the Danish labour market. A single fixed-term employment can be agreed freely, but be aware of the rules on renewal, equal treatment and clear terms for ending. A mishandled renewal can end with the employment being regarded as permanent with all the resulting obligations. Use a well-crafted template adapted to Danish law, and seek advice if in doubt.

---

The content of this article is for guidance only and does not constitute legal advice. Consult an employment-law adviser for advice on your specific situation.