Is it time to rethink using fixed-term employees in your business?

Fixed-term engagements can be a critical element of your resourcing model, be it backfilling employees on long-term leave, affording a short-term labour injection for a key project, or providing flexibility when the future is uncertain.

That said, businesses can slip into the trap of becoming over-reliant on fixed-term resources.

We know the federal government is focused on secure employment at present - current modelling suggests more than 40 per cent of fixed-term employees have been employed for more than two years. More than half of these fixed-term employees are women.

Australia is experiencing many employment law changes in 2023.

The Secure Jobs Better Pay changes have introduced limits for fixed-term arrangements that extend beyond two years or two consecutive contracts, whichever occurs first.

In practice, this means that if a fixed-term contract extends beyond two years, or there are more than two consecutive contracts, the contract term that provides for an expiry date will be void and have no effect. The remainder of the contract remains on foot and the employee will then have access to permanent employment conditions, including eligibility for redundancy pay and unfair dismissal protection.

Lawyers discuss the implications for businesses of limitations on fixed-term contracts.

Limited exceptions to fixed-term requirements

There are some limited exceptions based on earnings and the nature of the fixed-term requirement (e.g. peak demand periods or distinct and identifiable tasks involving specialised skills), and some additional requirements such as providing new fixed-term employees with a yet to be released information statement.

Where an employer breaches these provisions, they are exposed to civil liability proceedings and the onus will be on the employer to establish that one of the above exceptions applies to the arrangement.

It is important to note that these changes include anti-avoidance provisions. Employers will need to exercise caution when altering fixed-term engagements as consideration will be given to whether the work performed is the same or substantially the same and whether there is a substantial continuity of the employment relationship.

Employers have time to review existing arrangements. The changes come into effect on 6 December 2023 and will apply to all contracts entered into on or after that date, which includes any renewals or extensions that occur from that date onwards.

If your business engages fixed-term employees, you should consider undertaking a review of your current arrangements to identify if the changes will impact current and future resourcing requirements. It is important that your key internal stakeholders are aware of these changes and what may happen if these limits are exceeded.

Sarah Blackman is a Director and Principal Lawyer at Decipher Workplace Law in Melbourne. Sarah has extensive experience developing governance and policy frameworks across a diverse range of organisations.