Fixed Term Contractors – What All Business Owners Need To Know.

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Fixed Term Contracts are employment arrangements that set out an end date of employment – meaning that there’s no ongoing or indefinite employment beyond the specified end date.

Fixed term contract employees have the same rights and entitlements as a permanent part-time or full-time employee under the applicable industrial instrument, such as leave entitlements and allowances. There’s just no entitlement or expectation of ongoing employment beyond the specified contract end date.

Typically, this type of arrangement would be used to cover peak work periods, for project based work or to cover a longer term absent employee (such as extended personal leave or parental leave).

Historically, fixed term contractors could be engaged for any length of time: from a few months to as long as a few years.

As part of the raft of changes implemented in the Closing Loopholes legislation, from December 2023 new rules came into force, which tightened how an employer can engage an employee on a fixed term contract. Nearly a year on, we are still seeing businesses working out the impact of this to the structure of their workforce, and the changes needed: to both their current fixed term contractors, as well as the way they hire fixed term contractors going forward.

Fixed Term Contractor Key Rules from December 2023:  

  1. A fixed term contract cannot be longer than 2 years, including any extension or renewals.
    1. Note:  Even if the contract outlines a possible contract extension, the total length of contract employment cannot be more than 2 years.
  2. A fixed term contract cannot be extended more than once.  This rule applies even if the total period of employment would be less than 2 years.

What’s the risk to employers? 

If any of these rules aren’t adhered to, then the contract won’t automatically end on the specified contract end date. The employment will therefore be ongoing, and if the employer looks to terminate employment, they would need to undertake the usual and standard processes for terminating a permanent employee.

Exceptions:

There are exceptions where there is no limitations to the use of Fixed Term Contracts, such as for specific industries or roles – all of which are helpfully outlined in theFair Work Ombudsman’s Fixed Term Contract Information Statement.

One exception to note is for high-income fixed term contactors. Where the guaranteed earnings is higher than the high income threshold*, then the fixed term contract rules above won’t apply.  *As at 1 July 2024, the high income threshold is $175,000 and this figure increases annually.

Fixed Term Contract Information Statement:

Employers should also note that they are now required to provide new fixed term contractors with the Fixed Term Contract Information Statement along with the Fair Work Information Statement.

If your team currently employs fixed term contractors or if you are looking to hire some in the future – ResolveHR can work with you to determine the best option to suit your business’s specific set of circumstances and ensure compliance.  

Nick Hedges is the founder of Resolve HR, a Sydney-based HR consultancy specialising in providing workplace advice to managers and business owners. He recently published his first book, “Is Your Team Failing Or Kicking Goals – Take Control Of Your People & Their Performance”. It is a practical response to the most pressing HR challenges, which can be found at https://resolvehr.com.au/.

Disclaimer: The contents written do not constitute legal advice and does not cater for individual circumstances.   The information contained herein is not intended to be a substitute for legal advice and should not be relied upon as such.

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