Fixed-Term Contracts

In this article we will discuss different types of contracts, focusing on fixed-term contracts. To recap, permanent employees can be full-time (38 hours per week) or part-time (37 hours per week or less) and they will accrue leave benefits such as annual leave and personal leave. With casual employees you will have flexibility with their hours, but they will receive 25% casual loading in exchange for not accruing leave benefits.

For employees on fixed-term contracts, they will be working regular hours (full-time or part-time) and receive the same leave entitlements as permanent employees. However, both parties will agree before or at the commencement of employment the duration of employment (normally 6 months or 12 months but could be longer) and the end date. You can choose to offer a new fixed-term contract or permanent employment after the first fixed-term contract expires. It is important that you diarise the end date for your fixed-term employee.

Fixed-term contracts are perfect for an employee working on a temporary basis, such as to cover your permanent employee on maternity leave or if you need time to assess how busy the Practice will be. It gives you some flexibility with the role. Incidentally you might have the chance to assess the suitability of the employee, but that cannot be the purpose for entering into a fixed-term contract.

If it is a genuine fixed-term contract, it is unlikely that the employee will be able to bring an unfair dismissal claim if the employment relationship terminates when the contract expires. This is because both parties have agreed that the employment will end on the specified date and there is no expectation of ongoing employment.  

Some drawbacks associated with a fixed-term contract are administrative burden - busy employers might forget to take action when the original contract expires and the employment relationship continues. Another situation is the employee is offered consecutive new fixed-term contracts. In those circumstances the Fair Work Commission might decide the employment is ongoing and the unfair dismissal laws might apply, as the employee has reasonable expectations of ongoing employment. If you want to use a fixed-term contract, it is essential that you communicate clearly with the employee that his/her employment will not continue after the term expires unless a separate agreement is entered into.

For ClinLegal members, you can now access fixed-term contract templates on our App by selecting “fixed-term” when generating a new contract.

If you have any questions or would like to discuss further, please email [email protected].

This Circular is produced for guidance purposes only and is not a substitute for legal advice. Legal advice should be sought for individual circumstances. For tailored advice for your Practice, please contact us.