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Fixed Term Contracts (FTC) - New Rules Coming on Dec 06

Updated: Nov 16, 2023

What is a Fixed Term Contract?

A fixed-term contract (FTC) is a specific type of employment contract with a defined start and end date. It's used for temporary or project-based work and ends when the agreed-upon period expires, unless renewed.

For example, Maria, a harvest worker, enters into a fixed-term contract with a local farm during the peak harvest season. The agreement specifies that Maria will be employed for a duration of three months to assist with the harvesting of crops. As a temporary employee hired for a specific period, Maria's contract provides clarity for both her and the farm. Once the three-month harvest season concludes, Maria's employment under this fixed-term contract automatically ends unless there's a mutual decision to extend or renew the agreement for future seasons. This fixed-term arrangement allows the farm to efficiently manage the seasonal demand for labour while offering Maria a temporary yet defined opportunity to contribute her skills during the crucial harvest period.




What Is Changing?

Effective from 6 December 2023, significant changes will be introduced, impacting both employers and employees utilising fixed-term contracts. These alterations bring about a series of rules and limitations, aimed at implementing fair employment practices and protecting the rights of those engaged in fixed term positions.

Let's look into the key points that you need to be aware of:


Fixed-Term Contract Information Statement (FTCIS)

One of the pivotal changes revolves around the introduction of the Fixed Term Contract Information Statement (FTCIS).

As of 6 December 2023, employers must provide this statement to new employees before they start (or soon after).

The FTCIS will be available to download from the Fair Work website from 6 December 2023.


Side note: Remember that you also are required to provide a Fair Work Information Statement to all your employees (before they start, or as soon as possible after).


Casual employees must also receive the Casual Employment Information Statement.


Fair Work Introduces Limitations

In addition to the FTCIS, starting from December 6, 2023, there are new rules about how you can use fixed-term contracts.


1. Time Limitation

Fixed term contracts, including extensions and renewals, cannot exceed a total period of 2 years.


For example, if Johnny is offered a fixed-term contract for 3 years, this contract would breach the limitations, as it surpasses the 2-year limit.


2. Renewal Limitations

Fixed term contracts cannot have an option to extend or renew more than once, ensuring that the total employment period does not exceed 2 years.


For example, Marie's employer extends her initial 3-month contract for an additional 3 months. Offering a further (3rd) extension of 3 months would breach the limitations, even if the total period is less than 2 years.


3. Consecutive Contract Limitations

Employers cannot engage an individual on a new fixed term contract if:

  • the work is mainly the same as a previous contract,

  • there isn't a substantial break in employment between the previous contract and the new one; and

Any of the following conditions are met:

  • The total time worked in the old and new contracts is more than 2 years.

  • The new contract can be extended or renewed.

  • The previous contract was extended.

  • There was an initial fixed-term contract before the previous one, doing mainly the same work, with a continuous employment relationship between them.

For example, Sarah worked as a project coordinator on a fixed-term contract with a tech startup. Her initial contract ran from April 1, 2022, to March 31, 2023, with a possibility of extension. The company decided to extend her contract for an additional 9 months, concluding on December 31, 2023. Following this extension, Sarah agreed to a new fixed-term contract starting on January 1, 2024, for another year in the same role.


This contract is in breach of the consecutive contract limitations.




There are exceptions to these rules - which you can read on the Fair Work Website.


Conclusion

These changes mean you can't keep someone in the same role using fixed-term contracts for more than two years or two contracts in a row—whichever happens first.

It's a way to make sure employees aren't stuck in temporary roles for too long without the benefits and job security that usually come with permanent positions.

So, employers need to be careful not to extend the same role with fixed-term contracts for too long under these new rules.

Stay tuned for more HR tips and subscribe



DISCLAIMER:

The content provided on this website serves as a general information resource on the subjects discussed, and should not be considered tailored to specific individual circumstances or a replacement for legal counsel. While we exert significant effort to ensure the accuracy of our information, HR Consulting TAS cannot ensure that all content on this website is consistently accurate, exhaustive, or current. Recommendations by HR Consulting TAS and any information acquired from this website should not be regarded as legal advice.

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