Fixed-Term and Maximum-Term Contracts

From 6 December 2023 new rules and limitations come into force regarding the use of fixed-term and maximum-term employment contracts.

All fixed-term and maximum-term employee contracts entered into after 6 December 2023 must not exceed a 2-year term, including any renewal or extension period. The limitation extends to consecutive fixed-term contracts where there isn’t a substantial break in the employment relationship and the employee performs substantially the same work under both contracts.

Failure to comply with the new rules will invalidate the ‘expiry date’ of the purported fixed term contract but the balance of the contract will remain on foot. In such circumstances the employee will effectively become a permanent employee and gain access to service-based entitlements such as redundancy and unfair dismissal rights in the event an employer seeks to rely on the invalid expiry date to terminate employment.

There are some circumstances where the new rules for fixed-term contracts will not apply, including where:

• the employee is employed for a distinct, confined task involving a unique or specialised skill;

• the employee’s engagement is related to that training of that employee (e.g. a fixed term contract for the duration of an apprenticeship);

• the employee is assisting with the essential work of the business during a peak period;

• the employee is working in an emergency situation or is needed to replace a permanent employee who is temporarily absent;

• the employee earns more than the high-income threshold (currently $167,500 per annum);

• the position is fully or partially funded by the Government for more than 2 years and there is no reasonable expectation that the funding will be renewed;

• the employee is appointed under governance rules of an entity (i.e. a Company Constitution) and those rules limit the term of the position; and

• a modern award allows the employer to enter into fixed term contracts with options that differ from the new rules.

Please call our Employment Law team on 08 8177 5888 to assist with your next employment contract.