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.
A fixed term contract cannot exceed 2 years (including any extension/renewal period).
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:
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:
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.
The information in this blog is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.