Employers can no longer employ a person on a fixed-term contract that is longer than 2 years (including extensions) or extend a fixed-term contract more than once.
The changes are part of the Secure Jobs, Better Pay Act 2022 that amends the Fair Work Act.
Employers also need to issue employees on fixed-term contracts with a Fixed Term Contract Information Statement, as well as the Fair Work Information Statement.
Let’s have a look at the details.
What are fixed-term contract employees?
A fixed-term employee’s employment ends on a specified date, e.g. when a person they are covering for returns from parental leave, or when a particular event occurs, e.g. a project is delivered.
Fixed-term employees are usually full-time or part-time employees, but the nature of their employment differs to permanent employees, whose work is considered ongoing unless the employment relationship is terminated, e.g. the person resigns or is dismissed.
Fixed-term employees are generally entitled to the same wages, penalties, and leave as permanent (full- or part-time) employees. A modern award or registered agreement may provide additional entitlements and terms for a fixed-term employee.
Nearly 400,000 Australian workers (3.4% of the nation’s workforce) are employed on fixed-term contracts, according to recent data from the Australian Bureau of Statistics.
Changes from 6 December 2023
Limitations on use of fixed-term contracts
The changes set a new maximum length of 2 years for all fixed-term employment contracts entered into on or after 6 December 2023, including any extensions or renewals.
Fixed-term contracts can only be extended or renewed once, even if the total period is less than 2 years.
Employers won't be able to get around the regulations by taking action such as pausing before re-engaging the same person on a new fixed-term contract or engaging another fixed-term employee to do the same job.
Providing information statements to workers on fixed-term contracts
From 6 December 2023, employers must give new fixed-term contract employees a Fixed Term Contract Information Statement (FTCIS) before they start work, or as soon as possible after.
Employers also need to provide new fixed-term employees with the Fair Work Information Statement, which provides information about minimum workplace rights and entitlements.
The FTCIS will be available to download from the Fair Work Ombudsman website from 6 December 2023.
Exceptions to the new rules
There are some exceptions to the new limitations around the length and extension of fixed-term contracts, including:
- Work that requires specialised skills;
- Essential work during a peak-demand period;
- Emergency circumstances or the temporary replacement of an employee;
- Training arrangements under state or territory law;
- High-income employees (as defined by the high-income threshold);
- Government-funded contracts; or
- Governance positions.
An applicable modern award or agreement may also allow for different fixed-term contract options that differ from the new rules.
Learn more about the new rules and exceptions at fairwork.org.au
What happens when a contract doesn’t meet the new rules?
If a fixed-term contract is longer than 2 years, is extended more than once, or there are more than two consecutive contracts, the contract’s end date will no longer apply.
Other terms and conditions in the contract will still apply, including entitlements from any relevant legislation, award or agreement. This means the employee will be entitled to permanent employment conditions, including redundancy pay and protection from unfair dismissal.
Our advice
Given the new limitations on fixed-term contracts lengths and renewals, employers should review the use of fixed-term employees and ensure any contract templates comply with the regulations.
You will also need to ensure you give every new fixed-term employee a Fixed Term Contract Information Statement and Fair Work Information Statement when the person begins work.
It is good practice to document the reasons for engaging an employee on a fixed-term contract, especially when you renew or extend a contract.
If you need any help understanding your obligations under the new regulations, engaging fixed-term contract employees, or drawing up new contracts, don’t hesitate to get in touch with the team at MyHR.
