Introduction to New Regulations
Starting December 6, 2023, significant changes will be implemented regarding the engagement of employees on fixed-term contracts. Below is a guide for employers who have employees on fixed-term contracts = on what these changes entail and how they will impact both employers and employees.
Fixed Term Contract Basics
Fixed-term contracts are those that terminate at the end of a specified period. From the specified date, employers must adhere to new regulations when engaging employees under these contracts.
Mandatory Fixed Term Contract Information Statement (FTCIS)
A key change is the introduction of the FTCIS. Employers must provide this statement to employees before they commence employment or as soon as possible after the start date. The FTCIS will be available for download from the Fair Work website starting on the 6th of December.
Reminder: Fair Work Information Statement
In addition to the FTCIS, employers need to provide new fixed-term contract employees with the Fair Work Information Statement. This is a separate document that provides information about minimum workplace rights and entitlements. For more information, go to Fair Work Information Statement.
New Limitations on Fixed Term Contracts
These limitations, effective from December 6, 2023, include:
- Time Limitation: A fixed-term contract, including extensions and renewals, cannot exceed a duration of 2 years.
Example: Time limitations
Sam is offered a fixed term contract with an advertising agency for 3 years.
This contract breaches the limitations because it’s for more than 2 years.
- Renewal Limitations: Contracts cannot be extended or renewed more than once, nor can they be structured to extend the total employment period beyond 2 years.
Lara is employed on a fixed term contract for 6 months.
Her employer extends the contract for another 4 months when her initial contract ends.
At the end of the additional 4 months, Lara’s employer offers her another extension of 5 months.
This contract breaches the limitations because a fixed term contract can’t be extended more than once, even if the total period is less than 2 years.
Consecutive Contract Limitations
- Consecutive Contract Limitations: Employers are restricted from employing someone on a new fixed-term contract for mainly the same work without a substantial break, especially if the total employment period exceeds 2 years or if the contract includes options for extension or renewal.
Miro was employed on a fixed term contract as an area manager for a manufacturing company.
His previous contract was for the period 1 January 2022 to 31 December 2022.
It included an option to extend, which his employer used for an additional period of 1 year. This made Miro’s new end date 31 December 2023. On 1 January 2024 Miro signed a new fixed term contract for a term of 1 more year for the same position.
This contract is in breach of the limitations for the following reasons:
- the new fixed term contract is for the same position
- there is substantial continuity of the employment relationship between the contracts
- the previous fixed term contract was extended, and
- the total employment period is for more than 2 years.
Contracts entered into before 6 December 2023
For fixed term contracts entered into before 6 December 2023, the limitations don’t apply, however that contract will need to be considered when applying the consecutive contracts limitation for a new fixed term contract that is entered into on or after 6 December 2023.
Exceptions to the New Rules
Certain situations exempt employers from these limitations, such as contracts requiring specialised skills, training arrangements under state or territory laws, essential work during peak demand periods, emergency circumstances, high-income employees, government-funded contracts, governance positions, and specific award provisions.
Consequences of Non-Compliance
Contracts that fail to comply with these new regulations will no longer have a valid end date, although other terms and conditions, including entitlements from any relevant legislation, award, or agreement, will still apply.
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