Fixed Term Employment Contract – An Employer’s Quick Guide on the changes

The Fixed Term Employment Contract has gone through a change in Australia!

In response to the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022, changes have been made to the Fair Work Act 2009 that significantly impact how fixed term employment contracts are handled. Here’s a straightforward guide for HR professionals and employers on how to navigate these changes effectively.

Key Changes to Fixed Term Contracts

Effective Date: The new provisions apply from December 6, 2023. Contracts signed before this date are subject to transitional arrangements and may not be affected by the new rules.

Definition and Scope: The law now defines a ‘true’ fixed term contract as one without the option for early termination by notice. Such contracts must have a set end date without the possibility of extension beyond this point, except under specific circumstances like serious misconduct.

Restrictions on Fixed term Contracts

Duration and Extensions:

  • A fixed term contract cannot exceed two (2) years in length.
  • Employers may offer only one (1) extension within the two-year period, ensuring the total duration does not exceed the initial two-year limit.

Consecutive Contracts:

  • Successive fixed term contracts for the same role are restricted, particularly if they create an employment relationship spanning over two (2) years without a substantive break.

Exemptions to the Rule

Certain scenarios are exempt from these restrictions, including:

  • Employees performing specialised tasks that require distinct skills not available within the business.
  • Temporary engagements for peak periods or emergencies.
  • An employee employed on a salary higher than the high income threshold – as of 1 July 2023 this was $167,500
  • Positions that inherently require term limits, like certain roles that are Government funded
  • Certain governance positions that have a time limit under a constitution or rules of a company

The onus will be on the Employer to prove the exemption.

Legal Implications and Penalties

  • Employers must adhere to these regulations to avoid significant penalties. Non-compliance can lead to fines and, in some cases, the conversion of fixed term contracts into permanent positions if deemed in violation of the rules.
  • As a civil remedy the penalties that can be applied equate to $18,780.00 or $93,900.00 respectively.
  • A finding of a serious contravention can result in up to six hundred (600) penalty units, which would be $187,000.00 for an individual.

These penalties are set out at the time of writing.

Documentation and Compliance:

  • The Fair Work Act mandates that employers provide a Fixed Term Contract Information Statement to all fixed term employees.
  • Records should be meticulously maintained to support any exemptions claimed under the new regulations.

Practical Advice for Employers

  • Review and adjust existing fixed term employment contracts to ensure they comply with the new laws.
  • Use fixed term contracts judiciously and ensure any extensions or renewals are legally justified.
  • Keep detailed records of contract terms and employee roles to support compliance in case of audits or disputes.

By understanding and implementing these guidelines, employers and HR professionals can navigate the complexities of fixed term employment contracts under the new legislation, ensuring both compliance and efficient workforce management. This proactive approach will help mitigate risks and maintain a fair, transparent employment environment.

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Written By   

Jonathan Mamaril   


NB Employment Law   

[email protected]   

+61 (07) 3876 5111