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Back in December 2023, major changes to Australia’s Fair Work Act came into effect, placing tighter controls on how businesses use fixed-term contracts. These reforms were designed to limit insecure work and prevent employers from using rolling contracts for ongoing roles.
This marks a significant shift for HR leaders, legal teams, and compliance managers. What used to be a flexible solution is now a legal risk if not handled with care.
This article outlines what Australian businesses need to know about the new rules, the risks of fixed-term contracts, and how to navigate these changes without compromising agility. We’ll also examine when fixed-term contracts are still allowed, what happens if you get it wrong, and how CXC can help ensure your workforce remains compliant and competitive.
What’s changing: Australia’s new fixed-term contract rules
Fixed-term contracts have long helped businesses manage temporary needs quickly. For example, filling in for staff on leave, hiring for grant-funded roles, or handling seasonal peaks. But new rules now limit how and when they can be used.
What are the exact changes brought about by the reforms? Let’s break down the specifics.
Overview of the December 2023 reforms
Under the updated Fair Work Act, a fixed-term contract:
- Can’t exceed two years in total, including extensions;
- May only be renewed once;
- It is considered ongoing if the employee performs the same or similar work under consecutive contracts with minimal breaks.
In a nutshell, here is what the updates mean:
- Breaching these limits means the end date is ignored, and the worker may be treated as permanent—triggering entitlements like redundancy pay and unfair dismissal protection.
- Employers must now also issue both the Fixed Term Contract Information Statement (FTCIS) and the Fair Work Information Statement at the start of any fixed-term engagement. Not doing so can itself lead to a compliance breach.
These reforms aim to stop businesses from cycling through short-term contracts to avoid offering permanent roles and strengthen worker protection. The new rules introduce fundamental uncertainty for many employers, especially those using back-to-back contracts for convenience. Questions are now emerging about start dates, overlapping contracts, and whether reassigning someone to a slightly different role resets the clock.
The short answer? No. The law focuses on intent. Small changes to avoid the limits may still result in non-compliance.
These reforms create a clear compliance challenge. Employers must assess whether a fixed-term engagement is legally valid before offering it, or risk penalties and repercussions.
What happens if you get it wrong?
The penalties for breaching the new fixed-term contract rules are serious and immediate. Let’s examine what can happen to businesses that get it wrong.
Legal and financial consequences of non-compliance
Employers who breach the new fixed-term contract rules face steep penalties. A contract that runs longer than two years, includes multiple renewals, or forms part of a pattern of similar consecutive engagements may be legally treated as ongoing. When this happens, the employee is, as mentioned above, considered permanent, triggering entitlements like redundancy pay, unfair dismissal protection, and notice periods.
The fines are significant:
- For individuals: up to $18,780 AUD for ordinary breaches, and up to $187,800 AUD for serious ones
- For corporations: up to $93,900 AUD (ordinary) and up to $939,000 AUD (serious)
A breach may also occur if the employer fails to issue the aforementioned Fixed Term Contract Information Statement at the start of the engagement.
The law also includes anti-avoidance provisions. Employers who try to bypass the limits—by rehiring someone after a brief gap, rotating similar roles between staff, or altering job titles to reset the clock—may be found in breach. These actions may trigger adverse action claims and lead to further investigation.
The Fair Work Ombudsman can now investigate contract misuse and patterns of non-compliance. A public audit or enforcement action can lead to reputational damage, mainly if breaches are deliberate or systemic.
In cases where employees challenge their contract status or entitlements, disputes may be resolved through the Fair Work Commission, or escalated to the Federal Circuit and Family Court of Australia or Magistrates Courts. However, these processes can be lengthy, costly, and disruptive—making early compliance the far safer path.
In short, non-compliance means serious risk—claims, investigations, and reputational damage. Employers can no longer afford to make mistakes with fixed-term contracts.
Understanding exceptions and lawful use cases
While the new rules are strict, fixed-term contracts can still be used in specific situations. These exceptions are limited—and need to be applied carefully to stay compliant.
When are fixed-term contracts still permitted?
Common lawful use cases include:
- Specialist projects or funding-based roles, such as grant-funded research in higher education;
- Peak periods, including seasonal surges in industries like retail or agriculture;
- Award-covered positions, where a modern award or enterprise agreement allows longer fixed-term arrangements;
- High-income employees, earning above the set threshold (currently $167,500 as of FY2023/24);
- Temporary absences, where the contract covers a short-term replacement;
- Training arrangements, where employment is part of a structured training program;
- Government-funded roles, tied directly to a time-limited funding stream;
- Governance positions, where time limits are set by governing rules.
There are also temporary exceptions (until October 2025) for:
- Registered charities and not-for-profits engaged in funded program delivery;
- Employees in medical or health research sectors;
- Certain roles in public hospitals.
Contracts signed before 6 December 2023 may run to their original end date. However, any renewal or extension after that date must comply with the new rules. Note also that casual employees, who work irregular hours with no firm advance commitment to ongoing work, are not covered by the fixed-term contract limits.
Where exceptions are claimed, the employer bears the burden of proof. As mentioned earlier, the law includes anti-avoidance provisions—rotating similar roles or tweaking job titles won’t hold up under scrutiny. Each exception must be backed by clear documentation and accurate role classification. HR and legal teams should align to determine contract types based on role structure, not preference or habit.
Common missteps in workforce strategy
Despite the changes, many employers still apply fixed-term contracts in ways that no longer hold up. The issue isn’t always with knowing the law; it’s how legacy hiring practices conflict with it in real-world execution.
Using fixed-term contracts for ongoing roles
Even with clear rules in place, many businesses still misclassify ongoing roles as fixed-term, often because hiring processes haven’t caught up. In some cases, this is due to headcount freezes, where fixed-term is seen as a workaround. In others, finance teams pressure businesses to avoid locking in long-term headcount or permanent roles.
This isn’t just a legal issue; it’s structural:
- In sectors like education, non-profits, and consulting, roles may be funded by short-term projects, but the work is ongoing and essential to daily operations.
- Because funding is temporary, employment is treated the same way, even if the work never really stops.
That’s the disconnect. Legal knows the risk, HR sees the pattern, but no one revisits the underlying assumptions.
Fixing this means aligning hiring, finance, and compliance around one key question: Is the work genuinely temporary? If not, the contract model has to change.
Compliance and workforce planning going forward
So what happens next? The key challenge for employers is balancing compliance with flexibility. Many HR teams now find themselves stuck between business demands and legal risk. But it’s possible to move forward and thrive—let’s look at how.
Adapting to the new rules without losing flexibility
Step one is auditing all current fixed-term contracts:
- How many are approaching two years?
- How many have already been renewed?
- Are any roles on their third or fourth contract, even if the title has changed?
Next, review and update employment contracts and onboarding processes. Ensure that every fixed-term contract is issued with an FTCIS and that records of distribution are properly stored.
For roles where fixed term is no longer an option, there are alternatives:
- Use permanent employment for roles that are clearly ongoing.
- Engage workers on a casual basis where the work is irregular or uncertain.
- Consider Employer of Record (EoR) solutions—like those offered by CXC—which allow businesses to engage contingent workers without taking on full employment risk.
These models maintain business agility, but with the compliance guardrails needed under the updated Fair Work rules.
Employee rights and employer responsibilities
Alongside contract structure, employer obligations now include new communication requirements.
What to communicate and when
To remain compliant with the new rules, employers must clearly communicate a role’s duration, renewal limits, and whether it qualifies for an exception. If this isn’t clearly documented and communicated, the employer bears the burden of proof in any dispute.
As mentioned above, the FTCIS must also be provided at the start of every fixed-term contract. Issuing it late—or failing to issue it at all—can make an otherwise valid arrangement non-compliant.
If the rules are breached, affected employees may gain protections normally reserved for permanent staff, such as unfair dismissal rights and redundancy entitlements.
This matters most in fast-moving environments like retail or healthcare, where large numbers of employees are hired quickly. Legal requirements can be missed without built-in compliance checks, exposing the business to unnecessary risk.
Final thoughts: avoiding risk while staying agile
The updated rules on fixed-term contracts demand a shift in how businesses approach workforce planning. Flexibility is still possible—but it now requires stricter compliance, smarter contract decisions, and cross-functional alignment across HR, legal, and operations.
Key takeaways for legal, HR, and operational teams
- Fixed-term contracts must now be used with precision. The two-year cap and one-renewal rule are strict, and breaches carry legal and financial consequences.
- Avoid using fixed-term contracts for roles that are effectively ongoing. These are no longer considered grey areas—they’re explicitly regulated under anti-avoidance provisions.
- Understand and document exceptions properly. Whether it’s a grant-funded role, seasonal work, or a high-income employee, make sure every exemption is backed by evidence and reasoning.
- Strengthen your onboarding process. Issuing the FTCIS isn’t optional, and a missing document can unravel an otherwise compliant contract.
- Audit your current workforce. Identify which contracts are approaching limits, which roles need reclassification, and where your greatest exposure lies.
The risks of fixed-term contracts have changed, so it’s time for the way you manage them to change, too. But you don’t have to do it alone. You don’t even have to spend too much time studying the nitty-gritty of the reforms. CXC has decades of experience helping businesses scale worldwide while staying compliant. We have eyes and ears on the latest updates, laws, and rules—and we are ready for this change.
If you need support, talk to us at CXC to build a workforce strategy that stays flexible, compliant, and future-ready.
