Key Changes to Fixed Term Contracts for Australian Employers

by Sirius People

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From the 6th December 2023, changes come into place for employers who engage employees on Fixed Term Contracts (FTC). 

What is a Fixed Term Contract? 

A fixed term contract has a specified end date. It is not to be confused with a maximum term contract which also has a fixed end date but can be terminated by either party before that time. However, maximum term contracts will also be affected by the following changes. 

What are the changes?

It is a requirement for employers to provide all employees engaged on a Fixed Term Contract from 6th December 2023 a Fixed Term Contract Information Statement (FTCIS), it will be available to download on the Fair Work website from that date. 

  • Time Limitations: 

    • A fixed term contract cannot be longer than 2 years including extensions and renewals 

  • Renewal Limitations: 

    • Employers cannot extend/renew a FTC more than once even if it falls within the 2 year period. 

    • When an employer extends/renews a contract it cannot exceed more than 2 years of work

  • New/Consecutive Fixed Contracts Limitations:

    • A new FTC cannot be issued if the new contract is mainly for the same work as the previous FTC

    • There must be a substantial break between the previous and new FTC

    • The combined total period of employment between the previous and new FTC is no more than 2 years

    • A new FTC cannot be issued if the previous FTC wasextended

    • A new FTC cannot be issued if the initial FTC (prior to the most recent contract) was for mainly the same work or there was continuity of the employment relationship from the period of time between the initial contract and the previous contract. 

    • If the employee has never been engaged in a FTC in the past with their employer, then a FWIS Fair Work Information Statement should be issued in conjunction with the FTCIS.  

Are there any exceptions to the rules?

  • Specialised skills

  • Training arrangements e.g. apprenticeships

  • Essential work e.g. seasonal workers

  • Emergency circumstances or temporary absences

  • Employees surpassing the high-income threshold e.g. $167,500 per annum full time

  • Governance roles

  • Award provisions 

Why are these changes coming into effect?

These changes are being implemented across the country after the Federal government came under scrutiny for the overuse of fixed term contracts. The aim is to hinder employers from entering into successive fixed term contracts, which reduces permanent job opportunities for the 390,000 Australians who are currently engaged on fixed term contracts. 

What happens if I do not comply with these new rules?

The contract’s expiry date will no longer apply, while other terms and conditions outlined in the contract will still apply, including entitlements from any relevant legislation, award, or agreement. 

Penalties will also apply.

What do employers need to do?

  • Review current contracts of employment to ensure you are well equipped to comply with the changes coming into place on the 6th December 2023. 

  • Prepare and create process documents for when FTC’s are offered/expire so there is a plan in place for offboarding/retaining these employees   

  • Ensure a FTCIS is given to the employee prior to the commencement of their contract 

Visit the Fair Work government website to find out more or reach out to one of our friendly consultants who would be more than happy to assist you with navigating these changes.

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