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As of December 6, 2023, significant changes have been implemented regarding the use of fixed-term contracts for employees. Employers engaging individuals under such contracts must adhere to new rules that come with additional requirements and limitations. This article aims to provide clarity on the key aspects of these changes, ensuring compliance and understanding for employers.
New Rules for Fixed-Term Contracts:
Effective December 6, 2023, engaging employees on fixed-term contracts involves complying new rules. These contracts, which terminate at the end of a predetermined period, now require employers to provide a Fixed Term Contract Information Statement (FTCIS) to the engaged employees. It is essential to furnish this statement when the employee enters into, or as soon as possible after entering, the fixed-term contract.
Fixed Term Contract Information Statement (FTCIS):
The FTCIS, mandated from December 6, 2023, serves as a comprehensive guide for fixed-term employees, outlining crucial information about their employment, including the rules governing fixed-term contracts.
On top of the FTCIS, employers must also provide new employees with the Fair Work Information Statement, a separate document with information about minimum workplace rights and entitlements.
Limitations on Fixed-Term Contracts:
The limitations, also referred to as rules, apply to fixed-term contracts made on or after December 6, 2023, unless exceptions exist. Key limitations include:
1. Time limitations: Fixed-term contracts cannot exceed 2 years, including extensions or renewals.
2. Renewal limitations: Contracts cannot include options to extend or renew beyond 2 years. They also cannot be extended or renewed more than once.
3. Consecutive contract limitations: New contracts cannot be offered if the first 3 points below apply, and one or more of the scenarios in the 4th point applies.
- They had a previous contract with a fixed term.
- Their new contract and previous contract are mainly for the same work.
- There is significant continuity in the employment relationship between the previous and new contracts, and
- Either:
- The previous contract included an option to extend that was used
- The total employment period for both the previous and new fixed term contract has exceeded 2 years
- The new fixed term contract includes an option to renew or extend, or
- There was an initial contract in place:
- That was for a fixed term,
- That was for the similar work, and
- Where there was significant continuity in the employment relationship.
Protection for Employees:
Anti-avoidance protections have been established to prevent employers from deliberately circumventing these rules. Actions such as ending employment or changing work tasks may be deemed adverse actions if these protections are violated.
Fixed Term Contracts Before December 6, 2023:
The limitations do not apply to fixed-term contracts entered into before this date. However, these contracts must be considered when applying consecutive contract limitations for new contracts entered into after December 6, 2023.
Exceptions to Limitations:
Several exceptions exist, exempting certain fixed-term contracts from the limitations. These exceptions include positions requiring specialized skills, training arrangements, essential work during peak demand, emergency or temporary circumstances, high-income employees, positions subject to government funding, governance positions, and those covered by award provisions.
Calculating High Income Threshold:
As of July 1, 2023, the annual high income threshold is $167,500. For part-time employees or those working less than a year, the threshold is calculated by determining the required annual hours, dividing by the full-time equivalent, and multiplying by the annual high income threshold. To establish the full-time equivalent, consider the hours specified in the agreement or award applicable to the employee. If unavailable, use the hours of comparable full-time employees within the same employer. In cases where neither method applies, assume a standard 38 hours per week for a full-time employee in a given year.
Additional Exceptions:
Specific rules apply to fixed-term contracts in organized sport, high-performance sport, live performance, higher education, and positions funded by philanthropic entities or testamentary gifts or contributions.
Disputes and Resolutions:
Disputes between employers and employees regarding limitations or exceptions should be resolved through discussion. If unresolved, the Fair Work Commission can assist in mediation.
Fixed Term Employment – Other Entitlements:
Fixed-term employees are entitled to the same wages, penalty rates, and leave as permanent employees. Awards or agreements may provide additional terms.
Termination of Employment:
Fixed-term employees usually do not receive notice or redundancy of pay when employment terminates at the end of the contract period. Unfair dismissal eligibility is generally not applicable in such cases.
Independent Contractors:
It’s crucial to distinguish fixed-term employees from independent contractors, with additional information available for reference.
This article serves as a comprehensive guide for employers navigating the new regulations governing fixed-term contracts. Understanding these rules, exceptions, and dispute resolution mechanisms is essential for compliance with the Fair Work Act. For specific advice tailored to individual circumstances, employers are encouraged to consult with unions, employer associations, or legal professionals.
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