Many financial services employers have engaged staff members on fixed-term employment contracts in the last few years. Often, this has been by engaging a staff member for a 12-month period and then just before the expiry of the 12-month period, considering whether the business wants to re-employ the staff member.
Fixed-term contracts have seemed a sensible risk management approach and have been especially popular because it’s usually awkward terminating the employment of a staff member, and employers fear the legal consequences of unfair dismissals. Using a fixed-term contract, at least in the perception of the employer, seemed prudent because unless there is an active renewal of the employment contract, the relationship is terminated when the contract expires. Many employers feel less awkward to allow an employment contract to simply expire that to go through a process of actively terminating an employment relationship.
Anecdotally, we had had feedback that suggests that many employers also feel that in the period before expiry/ renewal of the fixed-term contract, there is an improvement in employee productivity and performance.
However, from 6 December 2023 the rules regarding fixed-term contracts have changed dramatically, and in most cases it is no longer possible to have fixed-term contracts which repeatedly rollover each year.
Key takeaways of the new rules from 6 December 2023
What is a fixed-term employment contract?
A fixed-term employment contract is a contract that terminates at the end of a specific period.
What are the new rules?
Exceptions to the new rules
There are exceptions to the new rules including where the employee brings necessary specialised skills, apprenticeships, temporary replacements, or where the employee earns more than the high-income threshold for a full-time employee, which is $167,500 from 1 July 2023. (If the employee is part-time or is employed for less than a year, this applies pro-rata.)
Example – Jack is employed under a 6-month contract as a locum responsible manager. Jack is paid $90,000 for the 6-month period, which is higher than the pro-rated high-income threshold. The new rules do not apply to Jack, so his employer can keep using fixed-term contracts for him.
Special Fair Work Statement to be provided
Employers must provide a Fixed-Term Contract Information Statement when engaging any employees under a fixed-term employment contract from 6 December 2023. The Fixed-Term Contract Information Statement can be obtained from the Fair Work website from 6 December 2023 (The requirement to provide a Fixed-Term Contract Information Statement is in addition to the existing requirement to give a new employee a Fair Work Information Statement).
What happens to employees currently on a fixed-term contract?
The new rules apply to contracts entered into on or after 6 December 2023, which includes new contracts and renewal of existing contracts.
However, where employees are on an existing fixed-term contract which began before 6 December 2023, you can let that contract run until it ends.
What to do now?
Employers should:
The new rules reduce flexibility for employers but are part of the current Federal Government’s policy of increasing job security for employees.
Fiona Halsey, director of Halsey Legal Services
Advice businesses continue to evolve, shifting from responding to regulatory change to focusing on opportunities to ...
The advice industry’s all-talk, no-action approach to the intergenerational wealth transfer is turning this golden ...
The future of financial advice is digital – it has to be. With the average cost of receiving financial advice currently ...
Never miss the stories that impact the industry.
Get the latest news! Subscribe to the ifa bulletin