Fixed term contracts, as opposed to permanent contracts, are those which expire after or at a specific time. An example of a fixed term contract includes where an employee is hired in a full-time position for 6 months to cover a permanent employee on parental leave, after which their employment with the organisation will cease.
What are the changes?
Amendments to the Fair Work Act have set new limitations on the conduct and application of these contracts. If an employee is engaged under a fixed term contract after 6 December 2023, then their employment is subject to the following conditions:
- The duration of their fixed term contract must be less than 2 years, inclusive of any extensions and/or renewals; AND
- Their fixed term contract is unable to be renewed more than once.
The use of fixed term contracts consecutively has also been limited. Employees are unable to engage with fixed term contracts if:
- Their previous contract was fixed term; AND
- Their previous and prospective contract are mainly for the same work; AND
- There is substantial continuity in the employment relationship between the previous and prospective contracts; AND
- Any of the following apply:
- The previous contract had already been extended; OR
- The total period of the previous fixed term contract and the prospective contract extends past 2 years; OR
- The prospective contract includes an option to renew or extent; OR
- Before the previous contract, there was an initial contract which was fixed term, detailed similar work, and where there was substantial continuity in the employment relationship.
Along with these limitations, employers must now also provide a Fixed Term Contract Information Statement (FTCIS) to any fixed term contract employees engaged following 6 December 2023.
Why were these changes made?
These changes were made to encourage the movement of employees from temporary arrangements into permanent employment. It aims to retain the flexibility that employers require to manage organisational needs, while providing further protections to employees who may be exploited through the use of fixed term contracts.
Exceptions
There are some circumstances where these new limitations do not apply. These circumstances include where the fixed term contract is used for:
- Work on a task that requires specialised skill;
- Training arrangements made under State or Territory law, such as apprenticeships and traineeships;
- Performing essential work during peak demand periods;
- Emergency circumstances, or where the employee is replacing someone who is temporarily away;
- High-income employees;
- Positions which are funded by government funding, and this funding extends past 2 years and is unlikely to be renewed afterwards;
- Temporary governance positions, such as board roles;
- Roles covered by an award provision which allows the limitations created by the new fixed term contract rules.
Protections for employees
Employers are unable to conduct anti-avoidance protections, which are actions made to avoid these new limitations. These include:
- Ending employment or not re-employing an employee for a period of time;
- Employing another individual to do the same or substantially the same work as a previous fixed term employee;
- Changing the type of work or tasks that an employee does or changing the employment relationship.
Fixed term contracts that don’t meet the limitations
If a fixed term contract does not meet the new limitations, the end date specified in the contract will be voided. This means the employee will remain with the employer for an indefinite period of time, though the other terms and conditions of employment will remain the same.
Source: HumanKapital
