Legislation Update: New limits to Fixed Term Contracts

By Diane Gibert, Managing Director of Certex International

Does your business operate fixed term contracts? Did you know that the Federal Government has introduced new limits to fixed term contracts? These changes come into effect December 2023. This should give employers enough time to understand their new contractual obligations and ensure compliance. Dianne Gibert from Certex International explains.

What is the issue with fixed term contracts?

Fixed term contracts serve a legitimate purpose for sourcing workers, especially in the shortterm However, for many employees, ongoing use of such contracts exacerbates job insecurity

“Changes to the use of fixed term contracts mean that employers retain the flexibility to manage their workplace needs, while providing protections to employees who may be exploited by these contracts when inappropriately used.” (Department of Employment and Workplace Relations)

What are the new rules?

Under the amendments it is an offence to enter into a fixed term contract with an employee:

For longer than two years

That allows the contract to be extended/renewed for longer than two years

That provides the option to extend/renew the contract more than once

Further, it is an offence for an employer to take action to try to avoid any of the above limitations.

Employers are required to provide a Fixed Term Contract Information Statement to all employees entering a fixed term contract The Statement will be developed by the Fair Work Ombudsman and outline limitations, exceptions, and the dispute resolution procedure.

What are the exceptions?

Exceptions apply when genuinely necessary and appropriate:

Performing a discrete task for a fixed period

Apprentices and trainees

Undertaking essential work during a peak demand period (e g harvest)

Temporarily replacing another employee on long leave (e g workers compensation leave)

Earning above the high income threshold

Exemptions also apply where fixed term contracts are permitted by an applicable modern award. The Minister can make regulations to exempt certain types of contracts.

What are the consequences of breaching limitations?

If a fixed term contract is made in breach of the new provisions:

The ‘expiry mechanism’ will be considered invalid; and All other contract terms will remain valid

In other words, the employee retains all terms and conditions of the contract but will be considered a permanent employee They also gain access to relevant safety net provisions including:

Entitlements to notice of termination and redundancy payments

Access to unfair dismissal proceedings

Employers found guilty of breaching limitations may also be subject to civil penalties

What should I do now?

Does your business use fixed term contracts? If so, will those arrangements still be permitted once the new rules take effect?

Remember to consider your options alongside the operational needs of the business and the applicable modern award terms that cover affected employees. These changes come into effect in December, but we recommend employers transition any fixed term contracts sooner rather than later.

Let iEngage support your transition

The ever-changing legislation around working with employees and contractors can be frustrating and time-consuming for businesses

Luckily, where employment law can confuse, Certex is here to clarify.

Our iEngage assessment – part of our iSuite Risk Management Program – is a high-level assessment of where your risks might be.

It covers contract law, renumeration, employee rights, and more and is designed to identify areas that may require further analysis and support.

Our assessors are Labour Hire and Compliance experts, and we have serviced the Recruitment industry for over 20 years These changes to fixed term contracts are ground-breaking, but the consequences for noncompliance can be extremely costly. We can help make sure you GET IT RIGHT.

For more information, email info@certex.com.au