How to Extend Your Employees’ Fixed Term Contract

Employers seeking flexibility for their business may employ fixed term employees (also known as temporary employees). This path may need to be taken for when employees are on maternity leave or long service leave. Fixed term employees can also be employed to complete specific tasks where extra labour is needed. However, temporary work may present challenges to both the employer and their employees because of the different employment conditions.

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What is a Fixed Term Contract?

Fixed term employees are usually full-time or part-time employees. However, unlike permanent employees, their employment lapses at the end of the specified period of time, or specified task in their employment contract. After this point, the employer may choose to renew the contract, or enter into a permanent contract. Fixed term contracts are different to

Nature of Fixed Term Contracts

Employees on a fixed term do not have all the entitlements of permanent employees because of the nature of employment. While fixed term employees don’t require a letter of notice or notice period, employers should notify the employee that their contract is coming to an end. Employees terminated at the end of their fixed term contract won’t have redundancy entitlements. Redundancy payments are available to employees terminated on a basis not specified in their contract, and before the end date. Employers should include clauses for early dismissal grounds in fixed term contracts to avoid unfair dismissal claims.

The essential features all fixed term contracts should have are:

  • a clearly stated starting date of employment
  • a clearly stated end date of employment
  • the specified task, explicitly stated, for specific task fixed term contracts.

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Extending a Contract

Employers can not continually renew or extend an employees fixed term contract indefinitely, to the point the renewal becomes just a formality. For that reason, the Fair Work Commission can look beyond the terms of the contract to the nature of the employment relationship in these circumstances. A decision by the Fair Work Commission established that employees can claim unfair dismissal for successive temporary contracts. This is to prevent employers from taking advantage of an employee’s lack of entitlements under a fixed term contract.

Employees still working for the employer after the term period has lapsed are permanent employees, under law. Employers will have to treat them as a permanent employee, with the same conditions as their old contract, but without the term limitations. To renew or extend the employees fixed term contract, a new contract with a new specified time period or task will need to be agreed upon.

Contact an employment lawyer to draft an new fixed term employment contract, or renew an old one.

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