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Employment contract in Australia

Every country has its own rules and regulations surrounding employment contracts. Businesses that want to hire Australian talent need to understand the specific requirements and legal obligations for employment contracts in Australia. In this guide, we’ll take you through everything you need to know, including the different types of employment contracts available in Australia, the terms that should be included, and the specific rules that apply to fixed-term contracts and extensions.

Employment contract policy and procedures

In Australia, an employment contract is any agreement between an employer and employee that sets out the terms and conditions of employment. Legally, employment contracts in Australia can be verbal or in writing. However, it’s best practice to provide a written contract so that everyone understands their rights and obligations.

Permanent employment contracts

In Australia, there are a few different types of employment contracts, which you can choose from depending on your needs. The standard type of employment contract in Australia is an ongoing permanent contract.

Employees with these contracts don’t have a set end date but work for their employer indefinitely until they either resign or are dismissed. These employees may be full time, which in Australia means working a standard work week of 38 hours. Or, they may be part-time employees, who work fewer hours.

Casual employment contracts

Another type of employment contract in Australia is a casual contract. Casual employees don’t have a fixed schedule or the promise of future work. Because of this, their shift patterns might differ each week depending on the needs of their employer.

Casual employees have fewer contractual rights than permanent employees. For example, they’re not entitled to paid leave or redundancy pay. Because of this, employers have to pay casual workers a ‘casual loading’, which is an additional payment of at least 25% of their earnings.

If you hire an employee on a casual employment contract but they later begin to work regular hours on a systematic basis, you have to offer them a full-time or part-time standard contract after 12 months.

FWIS and CEIS

New employees must be given a Fair Work Information Statement (FWIS) as soon as possible after their employment begins. This is a written statement of the employee’s conditions of employment, as set out in the National Employment Standards.

The equivalent for casual employees is a Casual Employment Information Statement (CEIS). Because casual employees are entitled to fewer rights than other types of employees, this is particularly important to ensure they understand the agreement they have entered into.

Modern award statements

When an employee’s work is covered by a modern award, employers may also need to provide them with a document specifying the award that covers them and their classification. A modern award is an industry or occupation-level agreement that provides the minimum conditions that an employer can offer their employees in that industry or occupation. These terms may be more favourable than the conditions set out in the NES, but they can’t be less favourable.

Probationary periods

There’s no statutory limit on the length of a probationary period in Australia, but 3–6 months is common.

Policies

Though they are generally not legal obligations in Australia, employers are strongly encouraged to put in place certain policies. In particular, it’s advisable to include policies concerning:

  • Anti-discrimination and harassment
  • Workplace bullying
  • Occupational health and safety

Certain corporations may be required by law to have a whistleblower policy in place.

Are policies and procedures part of an employment contract?

When you’re drafting an employment contract in Australia, you may wonder whether it’s best to incorporate your policies and procedures within that contract. While this is legally possible, it is not advisable because it could create a contractual obligation to abide by your policies and procedures, which are sometimes aspirational.

As an alternative, you can state in your employment contracts that you expect employees to observe the relevant policies and procedures but treat any breach of these as a disciplinary matter rather than a contractual concern.

Terms contract

When you create employment contracts in Australia, you’re free to set your own terms and conditions. However, the terms of a contract can’t provide for less favourable conditions than those set out in:

  • The National Employment Standards (NES)
  • Any awards; enterprise agreements or other registered agreements that apply

Equally, rewards or registered agreements might provide more favourable contract terms than the NES, but they can’t provide less favourable ones. Essentially, the entitlements set by the NES are the minimum requirements for all employees in Australia, with awards, agreements and individual contracts potentially adding additional rights and entitlements. Also, employees are always protected by the NES, whether or not they have signed an employment contract.

An example of contract terms that are inconsistent with the NES

For example, the NES state that all employees are entitled to four weeks of paid annual leave, based on their ordinary hours of work. When drawing up your employment contract terms, you could decide to give employees more paid annual leave than this, but you can’t give them less.

Any contract terms that leave employees worse off than their minimum legal entitlements are invalid and are not enforceable.

What is meant by ‘fixed term contract’ in Australia?

A fixed term contract is an employment contract that terminates at the end of a set period. When an employee has a fixed-term contract, the end date should be included in the terms of the contract. We’ll discuss fixed-term contracts in more detail in the section below.

Other contract terms

Any employment contract in Australia should include basic details like:

  • The employer’s name and address
  • The employee’s name and address
  • The start date of the contract
  • The end date of the contract (for fixed-term contracts)
  • Details about how, where and when the work should be performed
  • Who the employee reports to
  • The agreed remuneration
  • The terms of termination

There are also several other important clauses that you can choose to include in your employment contracts to protect you as an employer. For example, you might want to include clauses about

  • Confidentiality
  • Intellectual property
  • Post-employment restraints

Pay secrecy in employment contracts

In Australia, there are rules against including pay secrecy clauses in employment contracts. These are clauses that prohibit employees from talking about their pay with their colleagues (or anyone else).

From 7 December 2022, pay secrecy clauses that are included in employment contracts are unenforceable. And, from 7 June 2023, pay secrecy clauses can’t be included in employment contract terms at all. If an employer does include a pay secrecy clause in their contract terms, the clause would be unenforceable, and the employer could face penalties for including it.

Fixed-term contracts

A fixed-term contract is a type of employment contract in Australia that has a predetermined end date. Fixed-term employment contracts in Australia are commonly used for temporary or project-based work. In Australia, the maximum length of a fixed-term contract is two years.

Fixed-term contract employment rights in Australia

Fixed-term contracts are regulated by employment contract law in Australia. In December 2023, the Australian government introduced new rules regarding fixed-term contracts, including a requirement for employers to give any new employees engaged on a fixed-term contract a Fixed Term Contract Information Statement (FTCIS). This is a legal document that provides information about fixed-term contracts, including the rules about when fixed-term contracts can be used.

In general, employees on fixed term contracts are entitled to the same minimum wages, penalty rates and leave as permanent employees. Some awards and registered agreements provide extra terms and conditions that apply to fixed-term employees.

Ending a fixed-term contract

When a fixed-term contract comes to an end, employees typically don’t receive notice or redundancy, and they’re generally not eligible for unfair dismissal. An employer can choose to terminate a fixed-term contract before the end of the term, provided they have a valid reason. The most common grounds include:

  • Misconduct on the part of the employee
  • Breach of the contract
  • Repudiation of the contract
  • Poor performance

Employers can also end a fixed-term contract early due to a redundancy, as long as they follow the rules set out in the employee’s award or enterprise agreement. However, the redundancy is not considered valid if the employee could reasonably have been transferred to another position within the organisation.

Notice periods for fixed-term contracts in Australia

According to the Australian Government’s Fair Work Ombudsman, there is no requirement for an employer terminating an employee’s fixed-term contract to provide them with notice of termination. If an employee wants to terminate their contract before the end of the term, they may have to provide notice to the employer. The notice requirements will be outlined in the contract. Fixed term contract vs permanent employee

If you want to employ a worker in Australia, you need to decide whether to give them a fixed-term contract or a permanent one. Permanent employees are engaged to work for your business on an indefinite basis and may work either part-time or full-time hours. That means you shouldn’t hire an employee on a permanent contract if you only need them on a temporary basis. Fixed-term contracts, on the other hand, allow you to set an end date for your employment contract. When the contract ends, you’ll be exempt from unfair dismissal. You should only use a fixed-term contract if you only want to fill a temporary role, for example for maternity cover or to help out with a one-off project. There are rules against hiring the same employee on multiple back-to-back fixed-term contracts, which we’ll cover in the next section.

Extension of contract

As of 6 December 2023, there are new limitations on the use of fixed-term contracts in Australia. From this date onwards, a fixed term contract can’t be for longer than two years, including any renewals or extensions. Fixed-term contracts can also only be renewed or extended once. After this time, the company must either end the engagement or offer the employee a permanent position.

Extension of employment contract examples

For example, imagine you hire an employee on a fixed-term contract of 18 months, with an option to renew after that time. After the term is up, you can only renew the contract for an additional six months, or you will have breached the two-year limitation on fixed term contracts.

Alternatively, let’s say you hire an employee on a fixed-term contract ending in six months. In the contract, you include a provision for two extensions of six months. In this case, you would also be in breach of the rules, even though the total period of the contract and its extensions would be less than two years.

Limitations on consecutive fixed-term contracts

If you have previously hired an employee on a fixed-term contract, you can’t simply issue them with a new fixed-term contract at the end of that period. There are specific guidelines that govern when an employee can be offered a new fixed-term contract, which essentially come down to:

  • Whether the two contracts would add up to more than two years
  • Whether the two contracts include more than one renewal between them
  • Whether the new contract is for the same type of work
  • Whether there is ‘substantial continuity’ in the employment relationship

Exceptions to the limitations on fixed-term contract extensions

There are several exceptions to the rules we’ve talked about above. For example, the limitations don’t apply in the following situations:

  • When an employee with special skills is hired to perform a specific task
  • When the employee is engaged under a formal training arrangement like an apprenticeship
  • When the employee is performing essential work
  • When emergency or temporary situations require a second extension
  • When the employee’s guaranteed salary is more than the high-income threshold
  • When the employee’s position is paid for by government funding
  • When the contract is for a governance position that is for a limited time
  • When the employee’s award allows them to work contract-to-contract

Giving notice of an extension of contract Employers don’t need to give fixed-term employees notice to terminate their contract at the end date, but it’s still a good idea to notify them that the contract is coming to an end. If you want to renew or extend the contract, you’ll need to sign a new fixed-term contract with a new specified end date.

Working hours in Australia

The standard working hours in Australia are 38 hours per week, and standard working days are Monday to Friday.

Maximum weekly hours

Maximum weekly hours are a part of the NES, and forbid employers from requesting or requiring employees to work more than 38 hours per week for full-time employees, and their agreed ordinary hours of work for other employees, unless the additional hours are reasonable.

Reasonable additional hours

Employees can be asked to work extra hours on top of their ordinary working hours if the request is reasonable. To determine whether additional hours are reasonable, you should take into account things like:

  • Whether there is any risk to employee health and safety
  • The employee’s personal circumstances, including family responsibilities
  • The needs of the business
  • Whether the employee will receive overtime payment and/or penalty rates
  • The notice given by the employer for the request to work extra hours
  • The usual patterns of work in the industry

Awards, enterprises and registered agreements

Many employees in Australia are covered by an industry or occupation-based award, which usually provide for:

  • The maximum ordinary hours that can be worked in a day, week, fortnight or month
  • The minimum ordinary hours that can be worked in a day
  • Times of day that ordinary hours can be worked (e.g. from 7am to 7pm)

Most awards provide for maximum working hours of 38 hours per week or 10 hours per day before being entitled to overtime. Employees are also usually entitled to penalty rates (additional pay) if they work on a weekend or public holiday.

Maximum working hours in Australia

for award-free employees If employees are not covered by an award, they are known as ‘award-free’. These employees do not have a statutory right to receive overtime, although some companies may pay it anyway. Award-free employees have the right to work only 38 hours plus reasonable additional hours per week. While there is no official definition of ‘reasonable additional hours’, it’s generally understood to mean that employees are expected to work overtime hours necessary to complete the job they are employed to do.

How many hours can a student work in Australia?

There are no specific restrictions on the number of hours a student can work in Australia, apart from those set out in the NES. However, people who are in Australia on a student visa can only work up to 48 hours per fortnight while they are studying. There are no restrictions on the number of hours that student visa holders can work while their studies or training is not in session, such as during the summer holidays.

Remote work Australia

Like in many other countries, remote work in Australia became much more common after the COVID-19 pandemic in 2020. Today, many Australian employees work at least partially from home or from other remote locations.

Flexible working arrangements

The Fair Work Act 2009 is the primary legislation that applies to remote work in Australia. Under this act, some employees can request flexible working arrangements if they have worked for the same employer for at least 12 months. Examples of flexible working arrangements include changes to hours of work, patterns of work and locations of work (e.g. remote work). Many companies in Australia have also chosen to set up their own remote working policy to support their employees and provide a better work-life balance.

Health and safety for remote workers in Australia

It’s also important to note that work health and safety (WHS) laws apply to remote workers just as they do in traditional workplaces. This means a person conducting a business or undertaking (PCBU) must ensure the health and safety of their workers, as far as is reasonably practicable, even when they are working from home. Of course, working alone or remotely can increase the health and safety risks of any job. Workers may be isolated from support and assistance because of where or when they’re working, or the nature of their work.

Remote work visas in Australia

In the last few years, many countries around the world have begun offering digital nomad visas, which allow freelancers and remote employees to work remotely from those countries for a set period. Unfortunately, Australia does not have a specific digital nomad visa. While there are several visa options that may allow workers to temporarily work remotely from Australia, these are really intended to be tourist visas, and working (even remotely) could get you into trouble.

Remote work companies in Australia

Remote work is still a relatively new concept in Australia, but there are certain companies that have decided to make their operations 100% remote since the pandemic. As an employer, you’ll have to decide what level of remote work you want to offer to your Australian team.

Tailored employment contracts in 100+ countries

Like all countries, Australia has its own rules and regulations when it comes to employment contracts — and non-compliance could land your company in hot water.

Thankfully, our team is experienced in drawing up tailored, compliant contracts in Australia (and more than 100 countries worldwide). That means that, when you work with us, you won’t need to waste time worrying about whether you’ve got it right. Instead, you can focus on what matters: your business.

Compliantly hire employees anywhere with CXC

With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.

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