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Fixed Term Contracts - Friend or foe for employers?

Employment Contracts

8 Feb 2024 (Last updated 3 Sept 2025)

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Fixed-term contracts are an increasingly popular employment arrangement in Australia, known for their flexibility and specificity. This blog post will delve into the definition, uses, benefits, and key legal aspects of fixed-term contracts, providing a comprehensive overview for both employers and employees.

Defining Fixed-Term Contracts

Fixed-term contracts are employment agreements with a specified duration, established at the outset of the employment relationship. These contracts are typically used for project-based work, seasonal employment, maternity leave cover, or to fill temporary staffing gaps. Unlike permanent contracts, fixed-term contracts have a clear end date, providing a predetermined structure to the employment period.

Advantages of Fixed-Term Contracts

For employers, fixed-term contracts offer the flexibility to manage workforce needs in response to project timelines, seasonal peaks, or specific business cycles. They also provide a way to assess employee performance before committing to permanent employment. For employees, these contracts can lead to diverse work experiences, skill development, and often a stepping stone to permanent roles. 

Legal Considerations in Fixed-Term Contracts

Compliance with Australian employment laws, such as the Fair Work Act and the National Employment Standards, is essential when drafting fixed-term contracts. These contracts must clearly outline the employment duration, job responsibilities, remuneration, and termination conditions. Properly constructed fixed-term contracts help avoid legal disputes and ensure fair treatment of employees. Employers who are thinking about using fixed-term contracts should note that there are strict limitations on the maximum periods of fixed-term contracts and renewal of fixed-term contracts, with limited exemptions. Please be mindful that currently there is a two-year limitation on the length of fixed-term contracts. 

Transitioning from Fixed-Term to Permanent Employment

As fixed-term contracts approach their end date, employers must manage the conclusion of these agreements appropriately. This includes providing notice as required, finalising end-of-contract payments, and conducting exit interviews to gain feedback and insights. It is best to proactively communicate with an employee in the lead up to their end date to ensure that there is no misunderstanding on the part of the employee and no expectation of ongoing employment is formed.  

The Role of Fixed-Term Contracts in Workforce Planning

Incorporating fixed-term contracts into workforce planning allows businesses to respond agilely to market demands and project needs. Strategic use of these contracts can optimise workforce management, reducing overheads while ensuring access to necessary skills and labour. 

Emerging Trends in Fixed-Term Employment

The field of fixed-term employment is subject to changes influenced by workforce demographics, technological advancements, and legal shifts. These factors are reshaping how fixed-term contracts are viewed and utilised in Australia. Staying abreast of these trends helps employers effectively leverage fixed-term contracts in their workforce planning. 

Final Insights

Fixed-term contracts offer a pragmatic and flexible approach to employment that benefits both employers and employees. Understanding how to effectively utilise, draft, and manage these contracts is crucial for maximising their potential and ensuring compliance with employment laws.

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Employment Contracts: Written vs Verbal

Every time an employee enters into a work agreement, a contract is set in place. Even if you haven’t signed anything yourself, it might surprise you to know that a discussion and a shake of the hand could be as legally binding as a signed document. Whether it has been written or verbalised, any contract needs to be based on the following criteria: Offer Acceptance of the offer Agreement of all terms Intention to be legally bound A transaction – something is exchanged (eg, services for money) So what are the key differences between verbal and written, and which should you be using in your business? Verbal Agreements Also known as Handshake Contracts, verbal agreements are often used by small business owners because they are convenient. Many small business owners want their staff to trust them, and as such, they feel that a documented contract is unnecessary (or too formal). What many small business owners don’t realise is that these verbal contracts are legally binding and if a dispute arises, it may cause a plethora of legal issues. Written Contracts Written contracts frame the relationship between employer and employee which help to keep the framework of the business intact, and shapes how the employee fits into the business itself. It includes things like, the names of the parties, payment amounts and methods, expected hours of work, holiday leave and sick leave entitlements , right through to intellectual property if required, confidential information and privacy agreements, insurance, and expectations. And of course, it outlines the actual role the employee will be taking within the company. What should small business owners do? Verbal contracts might be easier and less time consuming, but they don’t come without problems and they can be extremely difficult to prove. You not only need to prove that the agreement exists, but also the actual terms agreed to. Basically it’s a case of one person’s word against another. In the case of a dispute, this can make court proceedings with former employees complex and messy. If you do not have a written contract in place, you will be required to provide evidence to support your version of the truth. In the case of a verbal agreement, this could include any emails or text messages that have been exchanged, pay slips, and so on. Legally, you aren’t required to have a written contract. However, in saying that, having it all on paper provides proof of the agreement if a problem should ever arise. You can easily outline the terms of the employment, and any expectations of the employee relationship. That means, neither you nor the employee have any stones left unturned. If you also include specific tasks and duties the employee is expected to complete, and information about uniforms and hours, etc; there can be no dispute. Ways a written contract can help small business owners A written contract is definitely one of the most proactive steps business owners can take to ensure their staff knows what is expected of them. Without a doubt, during the course of employment, there will be a question of the hours to work, agreed allowances, or wages.Written contracts provide all of this from the outset so there is no confusion. Legally, it allows business owners a safety net, providing them a point of reference that they can refer back to if they ever need to double check the specifics of an agreement. This means they can easily resolve any rights, duties and promises made by either party. Essentially, a written agreement allows a small business owner to protect themselves, and their business. Unlock employment relations support with Peninsula Peninsula has worked with thousands of business owners in Australia, supporting them in matters of employment relations and workplace health and safety. We understand the needs of small businesses and work together with them to create powerful systems and processes. If you’re feeling confused and want some advice, get in touch with the Peninsula team today.

Employment Contracts

Defining the Relationship Between Employers and Contractors

Independent contractors are heavily relied upon in Australia. The nature of seasonal and farm work that dates back generations is testament to this, such as hiring a neighbour to help shear sheep. Now a days it is no longer a friendly chat between mates but an agreement properly characterised and recorded. There have been many problems associated with independent contractors and this is mainly because the true nature of the relationship is hard to classify. This relationship between employer and contractor can change over time and if the negotiation and contractual proceedings is not updated, breaches in the Fair Work Act or sham contracting may result. Penalties for such incidences are $51,000 for corporations and $10,200 for individuals. Who is an independent contractor? An independent contractor is defined as being engaged under a contract for services, as opposed to an employee who works under a contract of service. A master servant relationship is defined and the totality if the relationship is considered when determining the status of the relationship. This is why it is so important to clearly identify and record the relationship status. Tips on how to identify an independent contractor Employers who answer yes to the following questions should consider redefining your relationship with your independent contractors: Is the individual required to wear a uniform? Does the individual have limited control over how they conduct their work? Does the individual use equipment supplied to them? Are weekly hours and times of work set by the Company? Does the individual receive annual leave, personal/carers leave and long service leave? Does the individual receive superannuation? Are they engaged on a continual basis? Access complete HR support with Peninsula You need to review the totality of your contractual relationship. Peninsula supports business owners and employers in implementing clear contracts and ensuring that both parties act in accordance with the Fair Work Act. If you would like to review your relationship with your independent contractors, call Peninsula today. Please be aware that this article is only intended to provide general advice, correct at the time of publication. It should not substitute the advice of a trained workplace relations specialist.

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