Published July 2023

WHAT IS A FIXED TERM CONTRACT?

Fixed term contracts are contracts of employment that apply for a specified period.  They are commonly used in heavy industry for employees working on a specific project with a known or expected completion date. There is generally no obligation to employ the fixed term employee beyond the end date.

Currently, there are no limitations on the use of fixed term contracts meaning they can be for any reasonable period of time, and extended or renewed at the discretion of the employer.

NEW LIMITATIONS & RULES FROM DEC 2023

From 6 December 2023, new limitations on the use of fixed term contracts will apply meaning that employers can no longer employ someone on fixed term contracts for the same role beyond two years (including renewals) or two consecutive contracts – whichever is shorter.

Please note that this will mean that if someone is employed for an initial fixed period of 6 months, then extended for 6 months, the total 12 months becomes their maximum period before they are deemed a permanent employee.

Where a fixed term contract is made in breach of the limitations, the employee will be defined as a ‘permanent employee’ and the end date under the relevant contract will have no effect. They will also then have access to any relevant entitlements which may apply to their permanent employment such as notice of termination, redundancy pay and/or access to unfair dismissal.

 If a dispute arises in relation to the above, the Fair Work Commission will have the power to conciliate, mediate or arbitrate (by consent), and also commence court proceedings. Employees will also be able to access the small claims court if they wish to take civil action. 

EXCEPTIONS TO THE NEW RULES

 Whilst the limitations may sound troubling for some businesses, there are several exceptions that may apply to your workforce. Some of these exceptions include where:

• The employee is employed under a training arrangement (such as apprentices and trainees);
• The employee is covered by an Award that allows for fixed term contracts in the new limitation circumstances;
• The employee is engaged to undertake work during emergency circumstances or during a temporary absence of another employee (for example, a period covering someone on worker’s compensation);
• The employee is engaged to perform only a distinct and identifiable task involving specialised skills;
• In the year the contract is entered into the amount of the employee’s earnings under the contract is above the high-income threshold for that year (NB: the high-income threshold is indexed annually on or around 1 July and is currently $167,500 per annum);
• The contract relates to a position for the performance of work that:
  • is funded in whole or in part by government funding or funding of a kind prescribed by the regulations; and
  • the funding is payable for a period of more than 2 years; and
  • there are no reasonable prospects that the funding will be renewed after the end of that period.

NEW FIXED TERM INFO STATEMENT

A new Fixed Term Contract Information Statement will be prepared which must be provided to the employee like the existing Fair Work Information Statement and Casual Employment Information Statement – that is, provided to the employee before or as soon as possible after commencement.

All Info Statements can be accessed on the Fair Work Ombudsman website here, and the Fixed Term version will be available in December when the changes take effect.

Penalties may apply to employers for failing to issue the appropriate statement, and for breaching the two-year limitation provisions.

WHAT SHOULD EMPLOYERS DO TO PREPARE?

 For businesses who are accustomed to the flexibility that comes with the use of fixed term contracts, there is a lot to consider and plan for. Here are our top tips on how to prepare for the changes:

• Familiarise yourself with the changes and keep an eye out for updates about existing fixed term contracts that will extend beyond 6 December 2023 (Edwards HR will release further information closer to December);
• Assess your current use of fixed term contracts and determine how you will need to adjust things moving forward;
• Remember these changes when you are planning and tendering for work;
• Consider whether any of the exceptions apply to your circumstances;
• Consider how you will build notice and redundancy entitlements into your budgets, if applicable;
• Consider how you will keep track of fixed term contract dates and extensions;
• Adjust your employment contract templates accordingly for compliance;
• From December, issue the new Fixed Term Info Statement to any new fixed term employees.

Remember, there are many other changes and reforms that have been implemented this year so far, and several more to come – stay up to date by subscribing to updates on our website at the bottom of this page.

As always, the team at Edwards HR are here to provide support every step of the way. If you have concerns about the changes and how your business may be impacted, contact us today on 07 3568 0866.