How to Extend Your Employees’ Fixed Term Contract

A fixed term contract extension pushes back the end date of an employee’s current contract so they can keep working in the same role. In Australia, you can extend a fixed term contract only once, and the total time in that role (including any earlier fixed term contracts) can’t go past two years unless an exception applies.

Here’s the trap. The end date creeps up, the employee is great, and someone sends a quick email saying “let’s keep you on for another six months”. That email can break the law, or quietly turn a temporary hire into a permanent one. Ten minutes of checking now saves you a dispute later.

Can a fixed term contract be extended in Australia?

Yes, once. A fixed term contract extension is lawful if the whole arrangement stays within two years and it’s the only extension or renewal for that work.

The limits sit in sections 333E to 333L of the Fair Work Act 2009 (Cth). They came in through the Secure Jobs, Better Pay reforms and apply to fixed term contracts entered into on or after 6 December 2023. Under those rules, you can’t enter into a fixed term contract that:

• runs for more than two years, including any extension or renewal
• includes an option to extend or renew more than once
• follows an earlier fixed term contract for the same or substantially similar work, where the earlier one was already extended, the combined period exceeds two years, or the new contract itself has an extension option.

Most employers read the two-year cap and stop there. The single-extension rule catches more people. Three six-month contracts add up to only 18 months, but the third one is still unlawful for the same role.

What counts as “the same role”?

The test looks at the work, not the label. If the new contract involves the same or substantially similar duties, and there’s substantial continuity in the employment relationship, the earlier contracts count towards the cap.

Renaming “Project Coordinator” as “Project Officer” won’t reset the clock. Neither will a two-week break between contracts if everyone expected the employee to come back. A genuinely different role with materially different duties is a different story.

Which exceptions let you go beyond two years?

The limits don’t apply to every fixed term contract. The Act lists exceptions, including where:

• the employee is engaged for a specified task that needs specialised skills
• the contract relates to a training arrangement, such as an apprenticeship
• the work is essential work during a peak demand period, or covers an emergency
• the employee is replacing someone who is temporarily absent, such as a staff member on parental leave or long service leave
• the employee’s guaranteed earnings are above the high income threshold when the contract is entered into ($190,100 from 1 July 2026, pro rata for part-timers)
• the role is a governance position with a fixed term set by a constitution or rules
• the work is funded by government money for more than two years, with no reasonable prospect of renewal
• a modern award that covers the employee allows a different arrangement.

Some temporary, sector-specific exceptions under the Fair Work Regulations (for example, in parts of the not-for-profit and research sectors) have changed or expired. Check the Fair Work Ombudsman’s current guidance if you’re relying on one.

One more thing. If an employee challenges the contract, you carry the burden of showing that an exception applies. Write down the reason for the exception at the time you sign, not after a dispute starts.

Is my fixed term contract extension allowed? Common scenarios

Most real situations fall into one of these patterns. They assume no exception applies and the work stays the same.

Scenario	Allowed?	Why
12-month contract, extended once by 6 months	Yes	One extension, 18 months in total
12-month contract, extended once by 12 months	Yes	One extension, exactly two years
18-month contract, extended by 12 months	No	Total of 30 months exceeds the two-year cap
6-month contract, extended twice by 6 months each time	No	Second extension breaks the one-extension rule, even though the total is only 18 months
Contract extended once, then a brand new fixed term contract for the same work	No	A new contract can’t follow one that was already extended
Initial contract includes an option to renew twice	No	The contract can’t allow more than one renewal
Casual role, then a 6-month fixed term, then one 6-month renewal	Generally yes	Casual time isn’t a fixed term contract, and the fixed term arrangement stays within one renewal and two years

If your situation sits in a grey zone, that’s usually a sign the work isn’t really temporary any more. More on that below.

How do you extend a fixed term contract properly?

Here’s the process our lawyers walk clients through. Start it four to six weeks before the end date, not the Friday before.

1. Map the history. List every contract this person has held for this work, with start dates, end dates and any extensions. Casual periods go on the list too, so you can see the full picture.
2. Run the two tests. Would the extension push total fixed term time past two years? Has the contract already been extended or renewed once? If either answer is yes, stop and look at an exception or a permanent role.
3. Write down the business reason. A delayed project, an extended parental leave, a funding round that runs to a known date. A short file note made now is far more persuasive than a memory reconstructed later.
4. Check the award or enterprise agreement. Some industrial instruments restrict fixed term arrangements or set their own rules. Confirm the classification and pay rate are still right for the extended period.
5. Put the extension in writing and get it signed. Use a variation letter or a new contract. Both of you should sign before the current end date.
6. Diarise the new end date. Set a reminder at least a month out so you can decide early whether to let the contract end or offer an ongoing role.

A variation to extend the end date counts as your one extension, even if the letter is mainly about something else. Changing hours and the end date in the same letter still uses up the extension.

If you’re signing a new contract rather than varying the old one, give the employee the Fixed Term Contract Information Statement again. It takes a minute and it closes off an easy compliance gap.

What should a fixed term contract extension letter include?

A fixed term contract extension letter doesn’t need to be long. It needs to be clear. At a minimum, cover:

• the employer’s legal entity name and the employee’s name
• the date of the original contract and its current end date
• the new end date, or the task whose completion ends the contract
• the reason for the extension, in a sentence
• any terms that change (pay, hours, duties, location) and a statement that everything else stays the same
• a line confirming this is the only extension and that the contract will end on the new date unless a separate ongoing role is offered
• space for both parties to sign and date it.

Here’s sample wording you can adapt for the core paragraph:

“We refer to your fixed term employment agreement dated 1 March 2026, which is due to end on 28 February 2027. Because the CRM migration project has been extended, we propose to extend your employment until 31 August 2027. All other terms of your agreement remain unchanged. This is a one-off extension, and your employment will end on 31 August 2027 unless we agree in writing to a new ongoing role. Please sign below to confirm you accept this extension.”

Remember that you can’t change an employment contract on your own. The employee has to agree, and you can’t pressure them into it. If you’d rather not draft from scratch, a letter to amend an employment agreement gives you a signed record of the change in a few minutes.

What happens if the employee keeps working after the end date?

Nothing good. This is the most common mess we see, and it usually happens by accident.

Once the end date passes with no signed extension, the contract’s main protection (the agreed finish line) is gone. A court or the Fair Work Commission will look at what both parties actually did. If the employee kept turning up and you kept paying them, the likely reading is that the employment continues on the same terms, but without a fixed end.

That doesn’t automatically make someone permanent in every case. It does mean you’ve lost the ability to rely on a clean expiry, and ending the employment later starts to look a lot like a dismissal. Don’t treat a late extension letter as a fix either. Backdating paperwork doesn’t change what happened in the gap.

The Fair Work Commission has also made clear it will look past the paperwork where an employer rolls someone through a series of temporary contracts. The question is whether the employment really came to an end because a genuine term expired, or because the employer decided to end it.

Fixed term contract to permanent: when should you convert instead?

Ask yourself one honest question: is this work actually going to end? If the role has become part of how your business runs, offering a permanent contract is usually safer than squeezing in a fixed term contract extension.

Convert when:

• you’ve already used your one extension and still need the person
• the “project” has quietly turned into business as usual
• you’ve told the employee, even informally, that their job is safe long term
• a new extension would take total time past two years.

Converting is simple. Issue a new ongoing contract, such as a full-time employment agreement, that starts the day after the fixed term ends. Recognise their prior service for leave and notice, because the law will count it anyway.

Many founders worry that permanent means “stuck with them”. It doesn’t. Permanent employees can still be performance managed, and roles can still be made redundant if the business genuinely no longer needs them. You trade the end date for clearer rules, and you often keep a better employee.

Fixed term, maximum term or casual: which one do you actually need?

Picking the wrong structure is where many extension problems start. Here’s how the three options compare.

	Fixed term	Maximum term	Casual
End point	A set date or task	A set outer date	None, work offered as needed
Early termination	Only if the contract allows it	On notice at any time	Usually without notice
Leave entitlements	Full NES entitlements, pro rata	Full NES entitlements, pro rata	Casual loading instead of paid leave
Two-year and one-extension limits	Apply	Apply	Don’t apply to casual engagement itself
Best for	Genuine time-limited needs with a firm end	Time-limited needs where plans could change	Irregular, on-demand work with no firm commitment

A maximum term contract gives you an end date plus the ability to finish earlier with notice. That’s handy if a client contract or grant could fall over. It is not a way around the limits, which apply to it in the same way.

Casual is only right if the work really is irregular. Rostering someone Monday to Friday, 40 hours a week, for a three-month placement isn’t casual work, whatever the contract says. If you’re unsure where the line sits, our guide to casual vs full-time employment breaks it down.

Ending a fixed term contract: notice, redundancy and unfair dismissal

When a genuine fixed term contract simply reaches its end date, the employment ends by agreement. The Fair Work Act doesn’t treat that as a dismissal, so there’s no statutory notice period, no redundancy pay and no unfair dismissal claim.

Three things change that picture:

• The contract breached the limits. The end date has no effect, so ending the employment on that date is a dismissal.
• You end it early. Unless the contract gives you an early termination right, ending before the end date can leave you owing the employee their pay for the rest of the term as damages.
• The arrangement wasn’t genuine. A series of contracts for ongoing work invites the argument that the employee was really permanent all along.

On redundancy, the rules are narrower than the original version of this article suggested. Redundancy pay under the National Employment Standards doesn’t apply when a genuine fixed term ends as agreed, and small businesses with fewer than 15 employees are generally exempt from paying it at all. If you terminate early because the role is no longer needed, check the contract and the NES before assuming either way.

Even with no legal requirement, tell the employee in writing a few weeks out that their contract is ending. It avoids the awkward “so am I staying?” conversation in the last week. A clear early termination clause in your fixed term employment agreement is the cheapest insurance you’ll buy.

What we see in Lawpath consultations

Lawpath’s employment lawyers field questions about fixed term contract extensions every week. A few patterns keep coming up.

Project-based businesses run out of extensions before they run out of work

Consultancies and R&D businesses with six to twelve month client projects regularly come to us after one renewal, asking if they can do “just one more”. The answer is usually no. The better question to ask at the first renewal is what you’ll do when that renewal ends. Founders who plan for that moment have options. Founders who don’t end up rushing a decision.

Switching someone to casual after the limit needs to be genuine

Some employers hit the cap and want to re-engage the person as a casual. That can be legitimate, but only if the work is genuinely casual with no firm advance commitment to ongoing hours. Re-labelling the same full-time job as casual doesn’t solve the problem. It creates a new one.

Visa end dates and contract end dates get tangled

Employers hiring people on temporary visas often ask whether to match the contract end date to the visa. A common approach is a fixed term contract that is conditional on the employee holding valid work rights, with a clause dealing with what happens if those rights lapse. The visa question itself is one for a migration adviser, but the employment contract should still be drafted to handle it.

Old templates are still in use

A lot of businesses are still using fixed term templates written before December 2023. Many contain options to renew “for further periods” that are now unlawful. If your template hasn’t been reviewed since the reforms, it’s worth fixing before your next hire, not your next dispute.

Fixed term contract extension FAQs

How many times can you extend a fixed term contract in Australia?

Once. The Fair Work Act allows a single extension or renewal for the same or similar work, and the total period can’t exceed two years unless an exception applies.

Can a fixed term contract be longer than two years?

Only if an exception applies. Examples include employees earning above the high income threshold ($190,100 from 1 July 2026), replacements for staff on extended leave, specialised-skill tasks and long-term government-funded roles.

Do I need a new contract or just a letter to extend?

A signed variation letter is enough if only the end date and a few terms change. Use a new contract if the role, pay structure or duties change significantly. Either way, both parties should sign before the current end date.

Can an employee refuse a fixed term contract extension?

Yes. An extension is a change to the contract, so the employee has to agree to it. If they say no, the contract ends on its original date.

Does a fixed term employee become permanent after two years?

Not automatically. But if the arrangement breaches the limits, the end date has no effect and the employee is treated as ongoing. Letting someone keep working after their end date creates a similar risk.

Do I need to give the Fixed Term Contract Information Statement again when extending?

You must give it when an employee enters a new fixed term contract. If you’re issuing a new contract for the extension, give it again. Re-sending it with a variation letter is a sensible habit even where it isn’t strictly required.

Does casual employment count towards the two-year cap?

The limits target fixed term contracts, so a period of genuine casual work isn’t itself a fixed term contract. The rules still look at the whole relationship, so map the full history before you rely on that.

Can a fixed term employee claim unfair dismissal when the contract ends?

Not if a genuine fixed term expires as agreed. They may be able to if the contract breached the limits, if you ended it early without a contractual right, or if successive contracts disguised ongoing work. Our guide on unfair dismissal claims by non-permanent staff covers the eligibility rules.

What are the penalties for breaching the fixed term contract rules?

Civil penalties can apply, and the end date in the contract has no effect. In practice, the bigger cost is usually an employee you can’t let go on the date you planned for.

Ready to sort your fixed term contract extension?

If you’ve read this far because an end date is looming, you’re already ahead of most employers. You don’t need to know every exception by heart. You need to know the history, make one decision, and put it in writing before the date passes. For a refresher on the basics, our fixed term contracts explainer is a good place to start.

If the history is messy or you’re near the cap, a quick call with one of our employment lawyers will tell you whether to extend, convert or let the contract end, and get the paperwork done for you. Book your consultation today.