Navigating the Overhaul: Understanding Australia’s New Fixed-Term Contract Legislation
Zoom Content Team
Last Updated: November 14, 2023
In a significant development set to reshape employment dynamics, Australia is implementing sweeping changes to its fixed-term contract (FTC) rules, aiming to safeguard the rights of nearly 400,000 workers. Effective from December 6, the new regulations bring about crucial limitations on the duration and renewal of fixed-term contracts, offering enhanced protection against potential exploitation.
Under the updated rules, employees will no longer be permitted to work on a fixed-term contract for more than two years. Additionally, employers are prohibited from extending or renewing worker contracts more than once, even if the cumulative employment period is less than 24 months.
The move is especially significant for the 390,000 Australian workers, constituting 3.4% of the workforce, currently employed on fixed-term contracts. Notably, 76% of these workers are on contracts lasting one year or less, with key sectors affected including education and training, media and telecommunications, and public administration.
These amendments are part of the broader reform introduced by the federal government through the Fair Work Legislation Amendment Act, titled “Secure Jobs, Better Pay.” The changes aim to prevent the abuse of rolling fixed-term contracts that could diminish permanent job opportunities, with the responsibility to comply with these changes resting squarely on employers to ensure they do not engage in practices that may undermine job security.
While the reforms aim to enhance job security, exceptions have been introduced for certain circumstances. Government-funded contracts, high-income employees, specialized skills, training arrangements, and essential work during peak demand periods are among the exceptions outlined. However, voices from sectors such as higher education and medical research have raised concerns, calling for additional exemptions based on unpredictable funding cycles.
Key Facts of Fair Work Australia’s Overhaul of Fixed-Term Contracts
Fixed-Term Contract Information Statement (FTCIS)
Commencing from December 6, 2023, the Fixed-Term Contract Information Statement (FTCIS) is a central component of the new regulations. Employers are mandated to provide this statement to employees entering new fixed-term contracts. Accessible for download from the Fair Work Australia (FWA) website, the FTCIS serves as a comprehensive guide, outlining the terms and conditions of fixed-term engagements.
In addition to the FTCIS, employers must uphold their ongoing obligation to furnish new fixed-term contract employees with the Fair Work Information Statement (FWIS). Distinct from the FTCIS, the FWIS offers essential information regarding minimum workplace rights and entitlements.
Every new fixed-term employee, from December 6, 2023, must be provided with:
· Fair Work Information Statement (FWIS) for new employees.
· Fixed-Term Contract Information Statement (FTCIS) for those on a fixed-term contract.
Limitations on Using Fixed-Term Contracts
Effective December 6, 2023, the legislative changes introduce limitations on the utilization of fixed-term contracts. These limitations are categorized into three key areas:
A fixed-term contract cannot extend beyond a period of two years, including any extensions or renewals. This rule aims to prevent the creation of extended, potentially exploitative fixed-term engagements.
Fixed-term contracts are restricted from having options to extend or renew that would exceed a total employment period of two years. Contracts cannot be extended or renewed more than once.
Consecutive Contract Limitations
Employers are prohibited from engaging an individual on a new fixed-term contract under certain conditions:
· If the new contract involves mainly the same work as a previous fixed-term contract.
· If there is no substantial break in the employment relationship between the previous and new contracts.
· If the total period of employment for the previous contract and the new fixed-term contract exceeds two years, or if the new contract can be renewed or extended.
Exceptions to the New Rules
Specialised Skills: Contracts necessitating specialized skills, such as a sports coach engaged on a 5-year coaching contract.
Training Arrangements: Contracts associated with employee training under state or territory law, exemplified by an apprentice offered a 4-year fixed-term contract covering the entire apprenticeship duration.
Essential Work: Contracts designated for performing essential work during peak demand periods. For instance, fruit picking, which may extend for two months during harvest, allowing the contract to have two additional extension options to cover further harvests.
Emergency Circumstances or Temporary Absences: Contracts formulated for working in emergency circumstances or temporarily replacing an employee. An example includes an employee taking a 3-year sabbatical, and the fixed-term contract covers that entire period.
High-Income Employees: Contracts tailored for individuals earning above the high-income threshold for a full-time employee. Pro-rata adjustments are considered for part-time or shorter-term roles. Contracts in these circumstances can exceed the 2-year restriction.
Government Funded Contracts: Contracts allocated for work funded by the government for over two years, with the understanding that funding is unlikely to be renewed. An illustration is being contracted to fulfil a project with an end date surpassing 2 years.
Governance Positions: Contracts designed for governance positions for a limited time, adhering to the rules of a corporation or association.
Award Provisions: Contracts aligned with employment awards, permitting different fixed-term contract options.
Ensuring Compliance and Resolving Disputes
Employers are urged to familiarize themselves with the new regulations and ensure compliance. In case of disputes, attempts should be made to resolve the issue through discussion. If resolution remains elusive, either party may lodge a dispute with the Fair Work Commission, the national workplace relations tribunal.
It is crucial to note that the FWA holds the power to initiate court proceedings for alleged breaches in line with its Compliance and Enforcement Policy.
Australia’s new fixed-term contract regulations represent a milestone in fostering fair and secure employment practices. As employers and employees adapt to these changes, the focus on transparency, informed engagement, and protection against potential exploitation marks a positive stride toward a more equitable and sustainable work environment. Staying abreast of updates and information by subscribing to email updates on the FWA website is advisable.