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Home | Member Updates | Upcoming changes to fixed term contract use in Australia

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Upcoming changes to fixed term contract use in Australia

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29 June 2023

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SUMMARY: Significant amendments are being made to Australia's Fair Work Act regarding the use of fixed-term contracts. These changes, stemming from the Secure Jobs, Better Pay Act 2022, aim to limit fixed-term employment to a maximum of two years, including renewals, and restrict repeated use of such contracts. These measures are part of broader efforts to promote equal pay, prohibit pay secrecy and sexual harassment, and address workplace discrimination.

The amendments call for universities and other employers to reassess their use of fixed-term contracts, ensuring compliance with the new laws. This involves evaluating current contract usage, anticipating future human resource needs, and being aware of the risks associated with non-compliance, such as penalties.

The changes necessitate a strategic shift in employment practices, particularly in sectors heavily reliant on fixed-term contracts, and require thorough preparation and adaptation to the new legal landscape.

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On Friday 23 June 2023, Lachlan Carr, Director, Legal at AHEIA, provided an update to members on the upcoming changes to fixed term contract use in Australia.

The Fair Work Act 2009 (Cth) provides minimum conditions for, and general protection of, the majority of employees across Australia. In November 2022, the Secure Jobs, Better Pay Act 2022 (Cth)became law, amending the Fair Work Act. Some of these have already taken effect, some will come into play later in 2023.

Among others, changes have been made to:

  • Promote equal pay
  • Prohibit pay secrecy
  • Prohibit sexual harassment
  • Close the Registered Organisations Commission
  • Further address issues of discrimination in the workplace
  • Bargaining toward an enterprise agreement, including resolution of disputes
  • Limit the use of fixed term contracts

Fixed term contracts do what they say on the tin: an employer engages an employee for a fixed term. When the term ends, the employment ends.As part of the November amendments the Fair Work Act prohibits the use of fixed term contracts in certain circumstances. If an employer enters into a fixed term contract that is prohibited by the Fair Work Act, they may be penalised.

From the effective date, employers will be prohibited from entering into a fixed term contract in certain circumstances. For example, a fixed term contract will not be permitted is it does one or more of the following:

  • Sets a fixed term that is longer than 2 years
  • Results in a combined term that is longer than 2 years, including by renewal
  • Allows for renewal more than once

In our seminar we discussed how these changes might impact the sector, and the circumstances in which exemptions may apply.  We also considered what universities should be doing now to prepare for the changes.

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1: Get an idea of what you are working with

At a high level, you need to understand how your university currently uses fixed term contracts. Ask yourself:

  • How many staff members are on fixed term contracts?
  • When did those terms start and when will they end?
  • What roles do people on fixed term contracts perform?
  • What percentage of our staff are on fixed term contracts?
  • Have any fixed term staff been engaged on a fixed term more than once?
  • Have any fixed term staff been engaged for a term (aggregate) of 2+ years?

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2: What does the future look like?

At a granular level, you need to understand your university’s future human resource needs. Ask yourself:

  • How many roles do we currently fill using fixed term staff that we anticipate we will still need at the end of the term?
  • When do current fixed term contracts end, and can they be renewed in compliance with the new limitations?
  • What alternative structures can we use to move people away from fixed term contracts, and what funding or structural changes might be required to do so?

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3: What risks should we be aware of?

Ask yourself:

  • Who decides when to engage someone on a fixed term?
  • Are hiring managers aware of the upcoming limitations?
  • Have standard employment agreements been reviewed to ensure they do not contravene the new limitations?
  • Do (or should) all fixed term contracts require central human resources approval (such as by a CPO or their delegate)?
  • Which faculties or business units use fixed term contracts the most? Should  we apply hypercare/provide dedicated training and compliance monitoring?
  • Are there roles that are more commonly filled with fixed term contracts than others? If so, why, and what does that tell us about how we might:
    • change our practice;
    • educate our team; and
    • meet our future human resources needs whilst complying with the new limitations.

Employers cannot engage in behaviour that is intended to avoid the fixed term contract limitations. 

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