As part of the raft of changes that were ushered in with the passing of the Secure Jobs Better Pay Act in December 2022, changes to fixed contract operations are due to come into force on 6 December 2023.  All employers who engage staff on a fixed term contract are on notice that the changes to the operation of those contracts, as well as new statutory statement provision requriements.  These requriements are new and detailed, and all employers should understand how they impact on their particular business circumstances now.

A fixed term contract is one that starts on a particular date and ends on a particular date.  Typically fixed term contracts are used to staff a project that the business knows will not continue forever, but will end at a particular point.

“We see fixed term contracts used to offer permanent employment to staff in a variety of circumstances, including when servicing a particular client contract.  For example when a member wins a client contract that runs for 18 months and requires the addition of dedicated admin or fulfilment staff, those staff are often offered a fixed term contract that gives them surety of ongoing employment, but only until the client contract end date”, explains ACAPMAs Elisha Radwanowski.

Other examples of fixed term contracts include maternity leave or extended long service leave coverage positions.

The Changes

From 6 December 2023 there are changes to the way that fixed term employment contracts can be utilised and applied in Australia.

Time limitation
A fixed term contract is not allowed to be set for more than 2 years in total.  This total length includes any optional extensions or renewals.

“Using our client contract example, in the past if there was an extension to the client contract often the employees that were engaged on a fixed term contract to fulfil that contract would have similarly been offered an extension to their fixed term contract.  This could have resulted in the employee being subject to a series of rolling fixed term contracts, sometimes for many years”, explains Elisha.

The changes to the law mean that an employee can be subject to two fixed term contracts, but only if the total time employed across both of the applicable contracts is no longer than 2 years.

“The changes reflect the fact that after 2 years of engagement the business should have a clear picture as to whether it can offer the effected employees continuing employment, regardless of the status of any client needs or contracts”, adds Elisha.

Renewal or extension limitation
Any fixed term contract can only be renewed or extended once.

“The renewal and extension limitation means that even if the total amount of time engaged on a fixed term contract is less than the 2 year maximum there can only be one renewal or extension.  For example if an employee is engaged on a 3 month fixed term contract to service a busy period and that is extended to 6 months due to demand, that contract can not be extended or renewed a second or third time, even though the total time worked on the fixed term contract is only 6 months.  Only two versions of the fixed term contract are allowed to operate”, explains Elisha.

Consecutive contract limitations
The changes include limits to the number of fixed term contracts that can be offered to the same person.  These consecutive limitations are in addition to the time and renewal limitations and address situations where businesses may ‘re-engage’ a fixed term employee.

A new fixed term contract can not be applied to an employee if;

the work is mainly the same as the work under the previous fixed term contract, and

there is no substantial (3 month) break in the employment relationship, and

the total employment would be more than 2 years, or, the previous fixed term contract had been renewed or extended.

Requirement to provide Fixed Term Contract Information Statement
The changes require that employers provide all employees engaged on a fixed term contract are provided with the new Statutory Statement – the Fixed Term Contract Information Statement.

“The Fixed Term Contract Information Statement has to be provided to employees when they are engaged, and when the contract is renewed or extended.  What is important to understand is that employees must also be provided with the usual Fair Work Information Statement”, explains Elisha.

The new Fixed Term Contract Information Statement has not yet been published by the Fair Work Commission.  It will be available on 6 December 2023 and will need to be provided at that time to all employees currently engaged on a fixed term contract.

Changes Summary

The changes have been summarised graphically for businesses ready reference;

Exemptions

There are exemptions to the fixed term contract limitations.

Where there are specialised skills, training arrangements, essential work or emergency circumstances fixed term contracts may be extended or renewed beyond the time, renewal and consecutive limitations.

There are also exemption for high income (over $167,500 pa) earners, fixed contracts that relate to government funded works as well as some award specific exemptions.

End of Contract

Where a fixed term contract breaches any of the limitations the contracts end date will be void, as will any contract ending provisions.  This will impact the actions and remedies available pertaining to any actions taken by the business at the ending of the relationship.

“If an employee is on a 3 year fixed contract that stipulates a 1 week notice period for termination and the business acts on that provision, providing the employee with 1 week notice of termination, the breach created by the contract being over 2 years effectively removes the end date, converting the employee to continuing or “normal” permanent employment. This means that the normal notice and procedural fairness requriements apply, not any stipulated end of relationship provisions”, details Elisha.

Disputes

Any disputes pertaining to fixed term contract operations, limitations or exemptions should first be raised in the workplace, but can be escalated to the Fair Work Commission for resolution if it is unable to be resolved at the workplace level.

What now?

As the changes come in businesses should start by reviewing any existing fixed term contracts.

“All businesses that engage employees on a fixed term contract should take the time to review their contracts, and the length of engagement of covered staff in total.  If the staff have been engaged for more than 2 years or the contracts have been extended or renewed more than once the business is not able to apply any further fixed term contracts”, explains Elisha.

Get ready for the Fair Work Commission release of the Fixed Term Contract Information Statement on 6 December 2023 and the circulation of that statement to current and future fixed term contract staff.

ACAPMA will circulate the Fixed Term Contract Information Statement to members once it is released.

Here to Help

ACAPMA Employment Department professionals are available to assist members with this and other employment matters via employment@acapma.com.au

HR Highlights are things to consider, implement and watch out for in your business. They are provided as general advice, Members are reminded that they can seek further advice on their situation by emailing employment@acapma.com.au its free for members. ACAPMA membership is affordable at only $860 per year for a single site and valuable with sites gaining HR advice support and representation as well as a raft of other benefits and discounts. Click here to learn more about ACAPMA membership.

Elisha Radwanowski BCom(HRM&IR)
ACAPMA

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