Fixed Term Contracts: New Rules!Jan 31, 2023
Firstly, let's refresh ourselves on what a fixed-term contract is:
A fixed-term contract is an employment agreement that provides a specific 'end date' for an employee. Once a fixed-term contract end date has passed the employer can:
- Extend the fixed term contract;
- Offer a different/new contract; or
- Terminate the contract. Note: if you don't actively end the contract then it can be implied that it has been renewed or extended.
It's not uncommon for employers to use these types of contracts to avoid hiring staff on a full-time basis and the previous lack of legislative regulation allowed employers to do so without consequences or limitations. The concern here is that employees were being "short changed" job security, some entitlements (like redundancy pay) and access to unfair dismissal proceedings.
Employers Take Note: new rules commence 6 Dec 2023!
On 2 December 2022, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 (Cth) was passed, and among many other changes, it addresses the regulation of fixed-term contracts.
Wait, so what is changing? What are the new rules? We're glad you asked!
It will now be unlawful for an employer to enter a fixed-term contract where:
- the duration of the contract is greater than 2 years
- the duration of the contract and any other period for which the contract can be extended or renewed exceeds 2 years (meaning two fixed-term contracts of a year each will not be acceptable, or any type of similar variation, if the employee will be engaging in similar work)
- an option or right to extend or renew the contract more than once (regardless of how short the period is)
Employers hiring an employee on a fixed term basis must also provide a Fixed Term Contract Information Statement.
Will there be any exceptions?
As with most legislation, there are always exceptions. But be careful and always get advice (i.e. from us or another HR professional) before evoking one.
Exceptions will apply where employees are engaged:
- as a casual worker
- to perform only a distinct and identifiable task involving specialised skills
- in relation to a specified training arrangement
- to do essential work during a peak period (eg. seasonal labour)
- to undertake work during emergency circumstances
- during the temporary absence of another employee (eg. parental leave)
- with earnings over the high-income threshold (which is $162,000)
- in connection with a position funded in whole or part by government funding
These exceptions generally aim to promote permanent and secure employment within Australia; which the current Government prefers.
When do these changes come into effect?
These changes are expected to come into effect on 6 December 2023 (or an earlier date to be fixed by proclamation).
What should we do now?
6 Dec seems like a while away sure, but there's steps you should be taking now to mitigate your risk and prepare for these changes. These steps include:
- Collating a list of all fixed term employees
- Assessing whether these employees will fit the exemptions listed above
- Assessing whether these employees should become permanent
- For those fixed term contracts expiring prior to this date, considering whether they should be extended, terminated or transferred onto a different (i.e. permanent) type of contract
Reach out to us if you want to chat through your options. If you're an existing retainer client - don't worry, we'll be in touch!
Thinking of "doing a sneaky"?
We'd advise that you steer clear of this. If employers are found to be in breach of these laws, then the fixed-term period of that contract will be considered invalid and unenforceable. Employers will also be faced with harsh civil penalties and if the breach is found to be a "serious contravention", the maximum penalty will be dramatically increased.
If you're unsure if these changes apply to you or your business or want help renewing your current employment contracts, reach out to the Employii team ([email protected]).
For more information head to the Department of Employment and Workplace Relations website (here).
Author: Chelsea Finlay (HR Officer)