Employers must be aware of the new rules for fixed term contracts which come into effect from 6 December 2023. 

Fixed term contracts are a flexible and cost effective way for employers to address short term resource requirements without locking in long term costs. 

You may think you are saving on costs but be careful. 

The new rules include the 3 limitations outlined below and the requirement to give new employees on a fixed term contract a Fixed Term Contract Information Statement. 

Time Limitation 

A fixed term contract cannot exceed 2 years (including any extension/renewal period). 

Renewal Limitations 

A fixed term contract cannot be renewed so that the total employment period (including the extension or renewal) is longer than 2 years. 

A fixed term contract cannot be extended or renewed more than once. 

Consecutive contract limitations 

Employers cannot use a series of shorter fixed term contracts to avoid the new obligations. 

An employer cannot use a new fixed term contract if:

1. the contract is for mainly the same work as a previous fixed term contract,
2. there is not a substantial break in the employment relationship between the previous and new contracts, and
3. the new contract can be renewed or extended or the previous fixed term contract was extended or the total employment period exceeds 2 years. 

Effect of breaching the new rules 

If a fixed term contract is made in breach of the new rules the clauses of that employment agreement which are inconsistent with the new provisions will be void and unenforceable, in which case the employee will be a permanent employee. 

Exceptions to the new rules 

An exception may apply if:

1. the employment is to use specialised skills to perform a discrete task for a fixed period;
2. the contract is for training the employee;
3. the employment is for essential work during a peak demand period, emergency circumstances or due to a temporary absence of another employee;
4. the Employee earns above the high income threshold;
5. the employment is for work which relies on government funding and the funding is not likely to be renewed;
6. the employment is for a governance postion (e.g., a directorship) and the governance rules of that entity prescribe a limited time period;
7. an award provides an exception. 

We recommend that you seek legal advice prior to relying on any of these exceptions. 

These changes may affect how your business structures and resources their teams. Employers are encouraged to update their existing employment precedents and review their arrangements with current employees to ensure they are prepared for these changes to take effect. 

If you are considering renewing a fixed term contract it is best to seek legal advice. Please reach out to Robert Lamb or John Davies via email or phone (07) 3220 1144.