Managing people

Fixed-term vs casual contract employment arrangements

Employers may need to hire temporary staff for a number of reasons. It could be for project work, maternity or paternity leave cover, or to meet seasonal demand.

Regardless of the reason, there are typically two common arrangements for this type of work: a fixed-term contract and casual employment.

Casual contract employment is where the nature of the work is not guaranteed. On the other hand, fixed-term employees are hired for a set amount of time with guaranteed hours and employee entitlements.

Before employing someone under a casual or fixed-term contract, it’s important to understand the differences between the two. Here’s what you need to know in order to make an informed decision about the best arrangement for your business.

What are fixed-term contracts?

What does a fixed-term contract mean? Essentially, it’s an employment arrangement that lasts for a specific period of time. Arrangements of this nature typically have a start and finish date specified on the contract. As the employment concludes over time, employers and employees generally don’t need to give notice or take any action to terminate the relationship.

Fixed-term contract employee rights are largely the same as those of permanent staff. This includes annual leave, sick leave, and personal or carer’s leave.

Fixed-term employees receive minimum wages as outlined by the National Employment Standard (NES) or industry award. However, fixed-term employees are sometimes exempt from unfair dismissal laws, provided the right type of contract template is used.

What is a casual contract in Australia?

According to the Fair Work Ombudsman, casual contract employment generally refers to an employee that is employed by the hour and called in as needed. Casual employees are not guaranteed work, often work irregular hours, and don’t receive annual or personal leave entitlements. The working relationship can also be terminated without notice by either party. To compensate, casual employees are paid with a higher base rate, known as ‘casual loading’. 

Casual contract employment vs fixed term: similarities and differences

It’s common for employers to confuse casual and fixed-term arrangements, as they can appear similar on the surface. This is because both casual and fixed-term contracts are not permanent in nature. Fixed-term contracts last for a set period of time. Casual contracts have no set commitment from employers on the amount of work offered or the duration of employment. However, this is where the similarities end.

Fixed-term employees have an expectation of continued employment over a prescribed period. They work regular hours as outlined in their contract, which is generally equivalent to permanent part-time or full-time hours. As such, fixed-term employees are entitled to minimum conditions outlined in the NES.

Casual employees do not have a commitment to a minimum level of employment over any time period. Employers have no obligation to commit to any set amount of work in advance. Employees also don’t have an obligation to commit to all work that an employee offers them. Unlike permanent or fixed-term staff, casual employees have fewer entitlements and benefits.

Termination also differs for both contracts. Casual employment has no end date and can be terminated with no notice from either party. On the other hand, the start and end date of employment is stated in the contract for fixed-term employees. Generally, no action is needed as the contract concludes by itself over time.

Fixed-term employment and casual contract employment entitlements

With the exception of notice when terminating a fixed-term contract, fixed-term employees have an entitlement to minimum conditions outlined in the National Employment Standard (NES)

This includes:

  • minimum wages according to the NES, or respective industry award or enterprise agreement

  • annual leave entitlements

  • public holiday pay

  • paid personal or carer’s leave.

Casual employees are entitled to:

  • a higher pay rate than their full or part-time equivalents

  • two days of unpaid carer’s leave per occasion

  • two days of unpaid compassionate leave per occasion

  • five days of unpaid family or domestic violence leave within a 12 month period

  • unpaid community service leave.

In most states, casual and permanent employees are entitled to long service leave. “Long-term” casual employees are also entitled to unpaid parental leave, provided they’ve been employed on a regular basis for 12 months or more.

Understanding the differences between a casual and fixed-term contract in Australia can help you find the best fit for your business. 

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