New laws have applied to fixed-term employment contracts since December 2023. These rules impose strict limits on the duration and renewal of fixed-term contracts. Understanding these new rules is essential for both employers and employees to ensure compliance and avoid unintended legal consequences.
This comprehensive guide, written by our employment contract lawyers, explains the new legal framework and highlights practical example. We answer common questions about fixed-term employment contracts under Australian law.
Key Takeaways
- Fixed-term employment contracts in Australia are now generally limited to a maximum of two years or two consecutive contracts for the same role
- Strict renewal and extension limits apply: only one renewal or extension is permitted within the two-year cap
- Employers must provide a Fixed Term Contract Information Statement (FTCIS) and a Fair Work Information Statement (FWIS) to new employees
- There are several statutory exceptions for specific industries and roles, including high-income employees, certain government positions, organised sport, and philanthropic funding
- Non-compliance may result in contracts converting to permanent employment, exposing employers to unfair dismissal claims and redundancy pay obligations
What Is a Fixed-Term Employment Contract?
A fixed-term employment contract is an agreement where employment is set for a specific period, with a clearly defined start and end date. These contracts are often used for:
- Project-based work
- Seasonal roles
- Covering employee leave
Fixed-term contracts are distinct from permanent employment, which has no predetermined end date. Under Australian law, these contracts must comply with the Fair Work Act 2009 (Cth) and any applicable modern awards or enterprise agreements.
There is also a difference between a fixed term and upper limit employment contract.
Key Differences: Fixed-Term vs Permanent Employment
Feature | Fixed-Term Employment | Permanent Employment |
Duration | Specific start and end date | Ongoing, no set end date |
Notice of Termination | Typically not required at end of term | Required under Fair Work Act |
Redundancy Pay | Generally not applicable | May apply |
Unfair Dismissal Rights | Usually excluded at end of contract | Available after qualifying period |
The New Legal Framework for Fixed-Term Contracts
Legislative Background
The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 introduced new changes to fixed-term contracts, with effect from 6 December 2023. The amendments are designed to:
- Prevent the misuse of rolling fixed-term contracts
- Enhance job security for employees
- Clarify employer obligations
Limits Placed on Fixed Term Contracts
Under section 333E(1) of the Fair Work Act 2009:
- Fixed-term contracts cannot exceed two years in total duration (including renewals and extensions)
- Only one renewal or extension is permitted
- The rules apply to consecutive contracts with substantial continuity and similar roles
Practical Examples of Fixed Term Contract Rules
Exceeding the Time Limit
ABC Pty Ltd employs Mike on a fixed-term contract for two years and one month. This breaches the two-year limit and is not permitted under the new rules.
Multiple Extensions
DCNG Studio Pty Ltd employs Greg for 12 months, extends his contract by six months, then extends again for another six months. This breaches the rule allowing only one extension.
Consecutive Contracts
MaxG Pty Ltd employs Kira for a year, renews for another year, then offers a new fixed-term contract for another year in the same role. The total exceeds two years and involves more than one renewal—this is not allowed.
Exceptions to the New Rules
Not all fixed-term contracts are subject to these limitations. Key exceptions to the fixed-term contract rules include:
- Contracts entered into before 6 December 2023 (though prior contracts may still be relevant for cumulative calculations)
- Casual employees
- Roles requiring specialised skills for a specific task
- Apprenticeship and traineeship arrangements
- Essential work during peak demand or emergencies
- High-income employees (as defined by Fair Work Regulations)
- Government-funded positions
- Roles covered by certain modern awards or enterprise agreements
- Organised sport, live performance, and higher education
- Positions funded by philanthropic entities or testamentary gifts
Mandatory Information Statements
Fixed Term Contract Information Statement (FTCIS)
Employers must provide every new fixed-term employee with an FTCIS, which explains:
- What a fixed-term contract is
- Relevant restrictions and exemptions
- Dispute resolution processes
The FTCIS can be provided in person, by mail, or electronically.
Fair Work Information Statement
All new employees—regardless of contract type—must also receive an FWIS, which covers:
- Workplace rights and entitlements
- Modern awards and enterprise agreements
- Flexible working arrangements
- Termination and redundancy rights
Consequences of Non-Compliance
If a fixed-term contract breaches the new legal limits:
- The termination date is invalidated; the contract may convert to ongoing employment
- The employee may gain access to unfair dismissal remedies and redundancy pay
- Other employment contract terms remain enforceable
Employers attempting to avoid these rules—such as by hiring someone else for the same role or artificially breaking continuity—may face additional penalties under anti-avoidance provisions.
Anti-Avoidance Protections
The Fair Work Act now includes anti-avoidance protections to prevent employers from circumventing the rules by:
- Ending employment or not re-employing an employee for a period
- Replacing an employee with someone else in a substantially similar role
- Altering the nature of work or employment relationship to avoid compliance
Such actions may constitute adverse action and attract significant penalties.
Frequently Asked Questions
What is the maximum duration of a fixed-term employment contract in Australia?
The maximum duration is two years, including any extensions or renewals.
Can a fixed-term contract be renewed more than once?
No. Only one renewal or extension is permitted within the two-year cap.
Are there exceptions to these rules?
Yes. Exceptions include high-income employees, certain government roles, casual employees, specific industry awards, and philanthropic funding.
What happens if an employer breaches the new rules?
The contract may convert to ongoing employment, and the employee could gain rights to unfair dismissal claims and redundancy pay.
What information must be given to employees on fixed-term contracts?
Employers must provide both a Fixed Term Contract Information Statement (FTCIS) and a Fair Work Information Statement (FWIS).
How do anti-avoidance provisions work?
Employers cannot take steps to deliberately avoid the new rules. Attempts to do so may result in penalties under the Fair Work Act.
