Fixed Term Contracts: An Explainer
Considering hiring a fixed term employee? Or not sure whether they should be a permanent employee? Find all about fixed term contracts here.
You may be wanting to hire someone due to a busy period for your business. Or you may be needing to replace someone who is on maternity leave. A fixed term contract is a great solution as you can hire someone for a specific amount of time. But what are they? What rights do they give employees? And how many contracts in a row can you have with the same employee? Read on for all you need to know.
What are Fixed Term Contracts?
They are contracts with an agreed upon end date. This can be a calendar date or the completion of a specific task or role. The end date of employment is usually inserted into the contract and may include criteria for early termination of the contract. The main feature of this type of employment contract is besides breaches or grounds of termination, both parties forfeit their rights for early termination of employment.
What is the difference between Fixed Term and Casual?
They are separate and distinct from casual contracts. Firstly, fixed term employees are either full-time or part-time employees as opposed to casual employees who work irregular hours. Furthermore, besides being employed for a fixed amount of time, these employees have the same rights for work conditions as permanent employees. It is thus essential to know what type of employee each of your employees are, so you know whether conditions such as the National Employment Standards (NES) apply to them. Just like casual employees, fixed term employees are not always exempt from unfair dismissal laws.
How many Fixed Term Contracts before an employee is Permanent?
The short answer is that it depends on the circumstances. Be careful when engaging an employee in consecutive fixed term contracts, as the Fair Work Commission (FWC) may explore what the real employment relationship is. Moreover, due to a recent FWC decision in 2017, it is vital you be wary of terminating an employee with successive contracts as the FWC may say that the employment relationship hasn’t been fairly ended.
Essential Features of Fixed Term Contracts
Make sure you include the following things in your fixed term contract with your employee:
- Clearly state the start date of employment
- Indicate clearly when employment finishes, either by date or criteria.
- Identify the duration of employment.
It is therefore important that you consider the nature of fixed term contracts before deciding in signing on a potential employee. Furthermore, it is vital that you know your duties towards them and whether they should be considered a permanent employee. If you have any doubt, get in touch with an employment lawyer for further advice.
Don’t know where to start? Contact a LawPath consultant on 1800 529 728 to learn more about establishing a partnership, customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.
Lachlan is an intern at Lawpath as part of the content team. He is currently studying a Juris Doctor at the University of Sydney. Lachlan has a keen interest in corporate law and commercial litigation.