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Understand what employers need to do to manage fixed-term contracts within the law.

What are fixed-term contracts?

Fixed-term contracts can be used for employees to work for a specified length of time or to work on a set project. These arrangements can give employers both certainty and flexibility. A fixed-term contract will usually expire automatically, at the end of the term or project, without the need for notice (although some fixed-term contracts also provide for early termination on notice before the expiry of the fixed term). Fixed-term arrangements are particularly useful for absence cover, to meet increased short-term business demands or for the completion of a specific project.

Do fixed-term employees accrue the same benefits as a permanent employee?

Fixed-term employees have most of the same rights as permanent employees such as leave entitlements and Award allowances. Like every other employee, they are entitled to the 10 minimum entitlements that make up the National Employment Standards. These benefits, or entitlements, include for permanent and fixed-term employees’ things like paid annual leave, public holidays, and the right to request a flexible working arrangement in certain circumstances.

The biggest difference from permanent employees regards the fixed-term, as opposed to ongoing, nature of employment. The contract for a fixed-term employee states directly when the term of employment will end. Fixed-term employees are often engaged to cover for an absent employee (e.g. as maternity leave cover), to fill a human resources gap, or staff a big project. Typically, fixed-term contracts will run anywhere from a few months to a year, however, can also be as long as a few years.

How many times can you renew a fixed-term contract?

There is no specified limit to how often you can renew a fixed-term contract.

Are fixed-term contract employees entitled to annual leave?

A fixed-term contract employee is entitled to annual leave, accrued at the same rate as an equivalent part- or full-time employee.

What is the major difference?

The critical difference between fixed-term contracts and permanent contracts relates to how you can terminate employees. Under a permanent contract, you or the employee must provide notice upon termination. Under a fixed or maximum-term contract, the employment will end without either needing to give notice to the other. The employee could simply not turn up to work after the end date. You may want to remind the employee that they will be finishing up shortly, but you are not required to do so.

What is a maximum term contract?

The difference between a fixed-term contract and a maximum-term contract also relates to requirements surrounding termination. During the term of a maximum-term contract, both you or your employee can terminate the employment after providing notice.

However, during the term of a fixed-term contract, neither party can terminate the employment earlier than the specified time period unless the contract specifically states it is possible. Here, if you ended the employment, the employee may be entitled to the wages they would have earned for the full period of their employment. But, if your employee leaves their job, you can claim compensation from them.

How long are the probation periods?

In regular permanent employment contracts, a probation period is a time where both you and the employee can assess the success of the new working relationship. It generally gives both parties the right to terminate the employment with less notice than is required after the probation period.

For example, you can terminate your employee’s contract with one week’s notice during a six month probation period, and with four weeks notice after the probation period.

You are less likely to need a probation period within fixed-term and maximum-term contracts, especially where the length of the employment is relatively short. Here, you will have less time to adequately assess an employee’s performance, so a probation period might not be necessary.