By Ceri Hohner

When the size and composition of your workforce depend on the grants you receive, the lack of certainty about future funding means it’s not always easy to manage employment arrangements. Sometimes casual engagements can help to fill ad hoc gaps, but where you’re looking for a guaranteed commitment for the duration of a grant-based project, this is where fixed-term and maximum-term employment arrangements can offer superior benefits for organisations in Indigenous health.

At FCB, we appreciate that it’s not always possible to predict how your organisation will be doing in six to 12-months’ time. With many businesses heavily reliant on funding through various programs, policies, and grants, it’s common for organisations in Indigenous health to almost double or halve in size on short notice, depending on whether a particular grant has been secured. As a result, permanent full-time or part-time employment may not be appropriate for any employees other than your team of core staff, with the remainder of the work needing to be picked up or dropped off depending on funding fluctuations.

Casual employment

Some employers utilise casual employees to navigate this ebb and flow of work, and that’s certainly an option for most health organisations. Casual employees can be offered work on an as-needed basis, such that employers aren’t locked into giving them minimum hours each week, or even any work at all. This works well for employees who may have other commitments such as university studies or carer responsibilities.

When engaging casual staff, organisations should be aware of the 2021 amendments to the Fair Work Act 2009 (Cth) (FW Act), which establishes the definition of a casual employee in the national system. Key among those requirements is the parties’ intention and understanding at the time the casual contract is formed: where there is an expectation of ongoing work in a regular pattern, there is a risk that the engagement will be found to be other than casual, potentially resulting in claims for entitlements such as paid annual leave, payment in lieu of termination, and paid public holidays not worked. If the requisite tests are met, however, these recent amendments have provided greater security to employers that the employment will not evolve into something other than casual.

Casuals are generally paid more than their full-time/part-time counterparts by way of a casual loading, which is often an additional 25 per cent. This can be a significant cost for organisations for whom every cent is vital but may be preferable to the accrual of future entitlements such as leave and payment in lieu of notice, where the expense may be realised at any time.

Even though casual employees may not have access to the full range of permanent entitlements such as paid leave (other than long service leave) and redundancy pay, employers should be aware that there are still certain entitlements afforded to casuals: this includes, but isn’t limited to, access to the unfair dismissal jurisdiction where they are regular and systematic, and eligibility to be offered or request conversion to permanent employment if they meet the eligibility tests for casual conversion after 12 months’ employment.

As such, we recommend that casual staff should only be used where the work is expected to be ad hoc or sporadic, to help with work of an unpredictable intensity or duration. Long term regular engagement of casuals can lead to them securing greater entitlements that run closer to those of permanent employees, reducing an employer’s flexibility to offer work on a discretionary basis.

Fixed-term and maximum-term employment

Where an organisation has greater certainty over the amount of work and time that a particular project or grant will generate, they may consider engaging employees on a fixed-term or maximum-term basis.

A fixed-term contract will end on a specified date, and neither party can terminate early (other than in cases of serious misconduct, if specified) without breaching the contract. A maximum-term contract, which is more commonly seen in the Indigenous health sector, also has a predetermined end date but allows for both employer and employee to terminate early, with notice, if the employment relationship isn’t working out or if funding unexpectedly dries up. An employee can be engaged as either full-time or part-time under each of these engagement types.

Both types of contracts allow for shortened or extended terms to be agreed between the employer and employee, should the circumstances of the organisation change, but it must be remembered that neither party can unilaterally (on their own) change the terms of an executed contract.

Maximum-term contracts provide greater flexibility due to their early termination clauses, but fixed-term contracts have an advantage under the FW Act, whereby automatic termination on their expiry date prohibits the employee from making an unfair dismissal claim concerning that termination. The natural ending of a maximum-term contract may be argued in the same vein, but case law has consistently distinguished between the two such that there is greater risk in allowing a maximum-term contract to expire than one which is characterised as fixed-term, particularly where there has been a repeated renewal or extension of the contract term.

The benefit to both maximum-term and fixed-term contracts is that it provides some certainty to health organisations when workforce planning and budgeting for labour costs. The term of employment can be specified as a particular period, or even the duration of an identified project, such that organisations are not left with surplus staff when projects cease, or grants aren’t renewed. Unlike casual employees, the status of a maximum-term or fixed-term employment arrangement will not change without the consent of both the employer and employee, other than in limited circumstances of multiple consecutively renewed/extended contracts, to which legal advice should be sought.

While permanent employees are subject to a redundancy process (including redundancy pay, if eligible) if their role was no longer required to be performed by anyone, employers can merely let a fixed-term or maximum-term contract naturally expire, without triggering any redundancy provisions. Employers should note, however, that ending a maximum-term contract early could still be subject to redundancy rules.

Choosing the right engagement model

There is no one size fits all approach when it comes to employment, and the pros and cons of each type of engagement model should be carefully considered before making a decision. The terms of the grant funding, the anticipated duration, the employee’s circumstances and the short and long-term goals of the organisation should all be considered when determining what type of contract to offer to a potential employee.

If you have a question about the 2021 amendments to the FW Act or the implications of these changes for your business, please contact the team at HR Assured.

For HR Assured clients, contact our 24/7 Telephone Advisory Service. 

Not an HR Assured client and need some advice? The team at HR Assured can support your business on a range of workplace matters. Contact us today to arrange a confidential, no-obligation chat.

Ceri Hohner is a Senior Associate and Solicitor at FCB Workplace Law (our parent company) who has assisted clients across Australia from a range of industries and businesses.