Changes Fixed Term Employment Contract Laws

Changes Fixed Term Employment Contract Laws

Fixed Term Employment Contract Laws have changed so If you use fixed term (temporary) contracts you will need to review them.      

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 includes significant changes regulating the use of fixed-term employment contracts. Changes will take effect on 6 December 2023 and will also apply to any fixed term contracts entered into since 6 December 2022. 

In broad terms, the new provisions limit the use of fixed term contracts to a period of 2 years (with some exceptions) or if less than 2 years, only one extension. 

The changes are designed to remove the practice of rolling over fixed term contracts by renewing or extending them at the end of their term, and aims to increase job certainty by compelling employers to offer genuine fixed-term arrangements or permanent employment. 

“Fixed-term employment contract” includes true fixed-term contracts (i.e. contracts that contain a term that ends the employment after a certain period and cannot be terminated at an earlier date) as well as maximum-term contracts (i.e. contracts that may be terminated on notice prior to the expiry of the term). 

Note that the new requirements only apply to full-time and part-time contracts - not casual. 

What’s changing? 

A fixed-term contract will effectively be prohibited if any of the following apply to the contract: 

  • the contract is for greater than two years; or 
  • the contract is renewable either for a period greater than two years or can be extended or renewed more than once; or 
  • the “consecutive contracts” criteria are satisfied (eg. where the employment relationship and the work duties performed across these contracts are the same or substantially similar). 

Some exceptions apply. The new restrictions will not apply where a fixed-term contract: 

  • is to complete a specific task using specialised skills that the employer’s organisation doesn’t have; 
  • relates to a training agreement (ie. apprenticeship or traineeship); 
  • relates to an employee earning more than the high-income threshold (currently $167,500 per annum full-time as at 1 July 2023); 
  • is where the employer needs additional workers to do essential work during a peak demand period; 
  • is for the undertaking of work during emergency circumstances or during a temporary absence of another permanent employee (eg. a parental leave backfill); 
  • falls under government funding exceptions (eg the role is directly funded by the government and there are no reasonable prospects that the funding will continue); 
  • relates to a governance position that has a time limit under the governing rules of a corporation or association of persons; or 
  • where a modern award that covers the employee allows the term. 

Fixed Term Contract Information Statement 

The Fair Work Ombudsman is preparing a new statement (similar to the Fair Work Information Statement) which will be released on 6 December 2023, and all employers must give a copy of this statement to any employee who enters into a fixed-term contract with them. 

This statement must be given to the employee before or as soon as practical after they begin their contract with the employer.  We will be uploading a copy of the statement for your benefit when it is made available and will let you know. 

Consequences for fixed-term contracts: 

If an employer enters into a fixed term contract with an employee that contravenes any of the limitations listed above: 

  • the ‘expiry mechanism’ will be considered invalid; and 
  • all other terms in the contract will remain valid. 

This means the contract will be an ongoing contract and the usual termination rules in any modern award and legislation will apply. As a result, remedies such as those available through unfair dismissals could also be available.  

What businesses need to do: 

Before 6 December 2023 

  • Review the way you are engaging fixed-term employees to ensure you comply with the new requirements. 
  • Review recruitment practices for specific roles to determine when fixed-term contracts can be offered and document the reasons. 
  • Determine your procedures for what happens when they expire. 
  • Identify any relevant exceptions that apply to your organisation. 

After 6 December 2023 

  • Ensure fixed-term employees are given a Fixed Term Contract Information Statement when they start.  
  • Clearly document the reasons for engaging an employee on a fixed-term contract, especially if it is a second fixed-term contract. 

How can HR Central assist you?  

  • HR Specialists can assist you to understand the implications of the new rules. 
  • HR Specialists can assist you with an audit of your existing and future contract requirements. 
  • HR Specialists can provide workforce planning and general recruitment advice. 

Please refer to the “Reference – Fixed Term Employment Contract Laws” document that is now available in the Resources section in HR Central, under Entitlements, for further information. 

As usual, we encourage you to get in touch should you have any questions/concerns regarding this article or if you need support or clarification as to how you best implement/manage these changes with your team.  

Need assistance? Contact our HR Support Team on 1300 717 721 or email, or click the button below.

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