Fixed term contract employment - entitlements

Analysis

Fixed term contract employment - entitlements

There is a perception among employers that a person employed on a fixed-term contract is a different type of employee compared to a 'permanent' full-time employee and, consequently, their entitlements with respect to award/agreement conditions and employment legislation are different.

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There is a perception among employers that a person employed on a fixed-term contract is a different type of employee compared to a 'permanent' full-time employee and, consequently, their entitlements with respect to award/agreement conditions and employment legislation are different.

This article summarises the employment entitlements in connection with a fixed-term contract employee.

Overview

Generally, the longer the period of a fixed-term employment contract then more the likelihood that the employee is entitled to an increasing number of employment conditions, particularly if the period of the fixed-term is one of twelve months or more.

Unfair dismissal

Where the nature of the contract of employment is for 'a specified period of time', an employee employed under such an arrangement is generally exempt from unfair dismissal legislation. However, employers should note this exemption only applies where the termination occurs on the completion date of the contract of employment. A fixed term employee terminated prior to the completion date could pursue an unfair dismissal claim.

A contract of employment for a specified period of time has, from time to time, been defined by the courts as one where the time of commencement and the time of completion are unambiguously identified by a term of the contract. This can be achieved either by the contract stating definite dates, or by stating the time or criterion by which one or other end the period of time fixed. In addition the contract should state the duration of the contract of employment.

Successive fixed-term employment contracts

Employers should be wary of employing a person on a succession of fixed-term employment contracts. The process of re-hiring an employee does not, in itself, mean the second or subsequent fixed-term employment contracts protect the employer from a claim for unfair dismissal. An industrial tribunal may determine a second or subsequent fixed-term employment contract for periods of temporary employment as a mere administrative convenience.

If the arrangement results in the employee having an expectation of continued employment, where the nature of the work under each employment contract is similar, and the use of fixed-term employment contracts is viewed as inappropriate for the relevant field of employment, the employer may be exposed to a claim for unfair dismissal. An employer should seek appropriate advice before entering into any second or subsequent fixed-term employment contract(s).

'All up' pay arrangements - casual nature of relationship?

A common misconception among employers is an employee engaged on a fixed-term contract of employment is a 'casual' employee and consequently, an 'all-up' rate is negotiated to compensate for the non-payment of certain employment entitlements. The nature of casual employment is generally defined, amongst other factors, as an employee called in as required, employed by the hour, with no expectation of continued employment.

A fixed-term contract suggests an expectation of continued employment for the prescribed period, which is a characteristic of full-time and part-time employment, depending on the number of hours worked each week. An employee who, for example, works 38, or 40 or more hours each week, could be categorised as a full-time employee by the applicable award or enterprise agreement. Subsequently, minimum conditions of employment such as annual leave, personal carer's leave and public holidays, would be applicable. Failure of the employer to provide these entitlements may breach the relevant award/agreement provisions or state/territory employment legislation.

Annual leave

Where a fixed-term contract employee completes 12 months continuous service with the employer, the employee would be entitled to four weeks annual leave. A fixed-term contract employee employed for less than twelve months service with the employer would be entitled to pro rata annual leave on the completion date of the contract of employment.

An exception to this is Western Australia, where an employer and an employee can agree that up to 50% of an annual leave entitlement can be foregone for an equivalent benefit (usually cash), however, this cannot be a condition of employment nor is it normally possible if an award applies.

Sick leave [Personal carer's leave]

Because the concept of sick/personal carer's leave is to provide a 'credit' of leave at the beginning of the relevant sick leave year, a fixed-term employee would be entitled to such leave, subject to meeting the prescribed qualifying period contained in the relevant award or agreement, and the production of suitable evidence to qualify for sick leave. Where the period of the fixed-term is greater than twelve months, the employee would be entitled to an additional credit of sick leave at the beginning of the second year.

Public holidays

A fixed-term contract employee would be entitled to a public holiday prescribed by the relevant award or agreement which falls on a day the employee normally works.

Parental leave

This condition of employment (i.e. maternity, paternity or adoption leave) generally becomes available to an employee who has completed twelve months continuous service with the employer.

Superannuation

Under the Superannuation Guarantee Charge, an employer is required to make superannuation contributions of 9% for an employee who earns in excess of $450 in a month. Once this threshold has been met, the employer is required to make the necessary contributions into a complying superannuation fund, irrespective of the period of the fixed-term employment contract.

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