Those employers who engage staff on fixed term contracts (that is, contracts that terminate on a specific date, or at the end of a nominated period) should be aware that, from 6 December 2023, new rules apply. There may be actions that you need to/should take prior to this date, so be sure to read on if you think these changes might impact you!
Note also that there are some exceptions to the application of the new requirements: refer below for details.
The new rules include restrictions on how fixed term contracts can be used, and a requirement that employees being engaged on fixed term contract receive a copy of the soon-to-be-published Fixed Term Contract Information Statement.
Limitations on the use of fixed term contracts
From 6 December 2023, three types of limitations apply to the use of fixed term contracts. These limitations impact:
- the duration of fixed term contracts
- the number of times a fixed term contract can be renewed, and
- an employer’s ability to engage a person on consecutive fixed term contracts.
More specifically, from 6th December;
- A fixed term contract will not be permitted to be for a duration of longer than 2 years, including extensions and renewals.
- A fixed term contract will not be able to include options to:
- extend or renew the contract so that total employment period (including the extension or renewal period) is longer than 2 years, or
- extend or renew the contract more than once (even if the total period is less than 2 years).
- An employer is not permitted to employ someone on a new fixed term contract if:
- the contract is for mainly the same work as a previous fixed term contract
- there isn’t a substantial break in the employment relationship between the previous and new contracts, and
- any of the following apply:
- the total period of employment for the previous contract and the new fixed term contract is more than 2 years, or
- the new fixed term contract can be renewed or extended, or
- the previous fixed term contract was extended, or
- there was an initial fixed term contract in place (before the previous contract) that:
- was for mainly the same work, and
- there was continuity of the employment relationship from the period of time (if any) between the initial contract and the previous contract.
Fixed Term Contract Information Statement
Also from 6 December 2023, employers must give employees they’re engaging on new fixed term contracts a Fixed Term Contract Information Statement (FTCIS).
The FTCIS will be published and available to download from the Fair Work Ombudsman website (www.fairwork.gov.au) from 6 December 2023.
Similar to the current Fair Work Information Statement, the FTCIS must be provided to employees on fixed term contracts before they start employment, or as soon as possible after. Note that they must ALSO receive the standard Fair Work Information Statement.
There are a number of exceptions to the applicability of these new rules, including cases in which the employee engaged on a fixed term contract is:
- a trainee or apprentice;
- to be paid more than the high-income threshold for the duration of the contract (currently $167,500pa);
- to perform a specific or discrete task involving specialist skills for a fixed period;
- temporarily replacing an employee on long leave;
- performing work that is funded by the government (completely or partially) for more than 2 years, and where the funding is not likely to be renewed afterwards;
- performing a time-limited governance position under a company’s governing rules;
- performing essential work during a peak demand period, e.g. during an emergency or harvesting time; or
- able to be employed in a fixed term capacity under the terms of an applicable modern award.
Employers should use caution when seeking to rely upon these and other exceptions, as some of the finer details are still being worked through (and may not become apparent until after 6th December). If you are seeking to rely on these exceptions we’d encourage you to seek further information and/or guidance.
What if the rules are breached?
If a fixed term contract doesn’t meet these new rules, and one or more of the exceptions does not apply, the end date of the breached contract will be deemed to no longer apply.
Some aspects of these new rules are currently a bit “grey”, and they can be tricky to navigate, so be sure to reach out if you need support.
Note that this article includes general information and is a summary only. It is not formal or legal advice. Information is we believe current and accurate at the time of publication – 10/11/2023.