From 6 December 2023, Fair Work has introduced new rules about how employers employ someone on a fixed term contract.
KEY TAKEAWAYS
- Employers cannot employ someone on a fixed term contract:
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- That is longer than 2 years;
- That has more than one extension option; or
- Where the employee will be employed under consecutive contracts.
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- The new changes only apply to fixed term contracts entered into after 6 December 2023.
- The new rules do not apply to casuals employed on a fixed term basis.
- There are other exceptions to the new rules for certain employees.
- Employees must be given the Fixed Term Contract Fair Work Information Statement.
WHAT IS A FIXED TERM CONTRACT
A fixed term contract is a contract between an employer and employee, which terminates at the end of an identifiable period. For example, the contract ends after a set date or period of time.
WHAT ARE THE NEW RULES
For fixed term contracts entered into after 6 December 2023, they cannot be for longer than 2 years. This includes any extensions or renewals. A fixed term contract cannot have an option to either extend or renew the contract so that the period of employment lasts longer than 2 years or extend or renew the contract more than once. In other words, an employer can still extend or renew a fixed term contract, but the extension can only occur once and must not extend the total period of employment for more than 2 years. Note: new provisions do not apply to casual employees.
The new provisions do not stop you hiring the fixed term employee on a permanent full-time/part-time basis after their fixed term ends or offering the employee a new fixed term contract on the condition it is not for the same or similar work.
Employers must provide fixed term employees with the Fixed Term Contract Fair Work Information Statement as soon as possible.
The new rules do not apply to all employees – there are ‘exceptions’ to the limitations. The full table of exceptions is featured on the Fixed Term Contract Fair Work Information Statement and includes but is not limited to:
- Specialised skills for a specific task;
- Training arrangements;
- Essential workers;
- High income earners;
- Governance positions; and
- If the Modern Award provisions allow.
We recommend seeking legal advice before confirming the employee meets one of the exceptions to ensure you are not at risk of a dispute.
NECESSARY ACTION
If your business employs people on a fixed term basis, it is important you review each individual employees’ contract to ensure you are not in breach of the new rules going forward.
To discuss these changes in detail, or how we can assist you in reviewing your employment contracts or preparing a brand-new suite of template contracts tailored to your business, please contact us on the details provided below. We can also assist with any disputes involving fixed term contracts.
