Thanks to an increasingly flexible workplace, it seems like when it comes to employee contracts, almost anything goes. But although your options as an employer may have increased, so have your responsibilities.
It’s important to classify your employees correctly so that they receive all their entitlements under the law and you comply with the legislation.
Here are just some of the things you need to know to ensure you and your business stay on the right side of the law.
An employment contract is an agreement between you – the employer – and your employee/s. It can be written or verbal, and sets out the terms and conditions of your employment arrangement.
Employment contracts & National Employment Standards
Since 2009, significant changes have been made as to how employers can employ workers. These changes include the introduction of National Employment Standards (NES) and the commencement of updated awards.
The NES provides every Australian employee with 11 minimum entitlements.
- Maximum weekly hours
- Requests for flexible working arrangements
- Offers and requests to convert from casual to permanent employment
- Parental leave and related entitlements
- Annual leave
- Personal carers leave and compassionate leave
- Community service leave
- Long service leave
- Public holidays
- Notice of termination and redundancy pay
- Fair work information statement
All employment contracts (whether based on an award or not), must adhere to the NES.
That means you can’t impose an award, employment contract, enterprise agreement or other registered agreement with conditions that are less than those provided by the national minimum wage or NES.
Who’s covered by the NES?
All employees in the national workplace relations system are covered by the NES, regardless of the award, registered agreement or employment contract they’re hired under. In fact, the NES applies whether an employment contract has been signed at all.
But despite the appearance of rigidity, there is room for flexibility. You can negotiate employment conditions with individual employees, as long as you can demonstrate they’re better off overall as a result of the agreement you reach.
To put it into context, let’s examine casual, part time, full time and fixed term employees.
A person is a casual employee if they accept an offer for a job knowing that there is no firm advance commitment to a continuing and indefinite pattern of work.
To determine if you have a made a firm advance commitment to a continuing and indefinite pattern of work, you should consider the following:
- Does the employee maintain a choice to accept or reject work?
- Does the employee work as required depending on the needs of your business?
- Is the employment described as casual employment?
- Is the employee paid a casual loading (a higher pay rate for being a casual employee), or a specific pay rate?
If you have answered yes to any of the above questions, this may suggest that a casual employment relationship exists.
This type of arrangement differs significantly from permanent employment. Full-time and part-time employees have an advance commitment to ongoing employment (or a fixed term contract). They can expect to work regular hours each week and are entitled to sick and annual leave.
As ‘compensation’ for the irregular nature of their work, casual employees are entitled to a higher hourly pay rate – also known as ‘casual loading’ – than full or part-time employees. Under the NES they’re also entitled to:
- Access a pathway to become a permanent full-time or part time-employee (in some circumstances)
- Two days unpaid carer’s leave and two days unpaid compassionate leave (per event or occasion)
- Unpaid community service leave
- 5 days unpaid family and domestic violence leave (in a 12-month period)
- The Fair Work Information Statement
Casual employees employed regularly for 12 months (and whose employment is expected to continue) also have additional entitlements under the NES. These are: the right to request flexible working arrangements and access to parental leave.
As an employer, you can only refuse a request for flexible working arrangements on ‘reasonable business grounds’. You can find more information on this on the Fair Work website.
This same rule also applies to offers and requests for casual conversion. Please see the Fair Work website for further information.
This agreement is for casual employees who are employed under a modern award where the standard award entitlements apply. A Casual employee is generally hired on an informal, uncertain and irregular basis. They don’t usually receive sick leave or annual leave and should be paid a casual loading to offset this lack of entitlements.
Bar staff or shop assistants who are never exactly sure when they will be required for work are prime examples.
- Work, on average, less than 38 hours per week
- Usually work regular hours each week
- Are entitled to the same benefits as a full-time employee
- Are permanent employees or on a fixed term contract
As they’re employed for fewer hours than a full-time employee, part-time employees receive entitlements like sick and holiday leave on a pro rata basis – that is, based on how many hours they work each week.
A permanent part-time employee works regular and ongoing hours, but still less than a full-time employee. Just like part-time employees, they receive the same minimum entitlements under the NES as full-time employees, but on a proportional basis, according to the number of hours worked per week.
This employment contract is suitable for part time employees employed under a modern award where the standard award entitlements apply.
Part time employees work less hours than full time employees. However, they receive all of the entitlements of full time employees calculated on a proportional basis.
Full-time employees have ongoing employment and work, on average, 38 hours per week. Their actual hours of work are either agreed to between you and them, and/or are set by an award or registered agreement.
As an employer, you must provide full-time employees with the eleven minimum entitlements as specified under the NES and listed above.
Under the NES, you and your full-time employees may agree to change their employment to a part-time or casual basis. The usual rules for ending employment apply, including giving or paying the employee the required notice, and paying out any leave or other entitlements owed.
There are some circumstances under which you as the employer may change the basis of their employment to part-time or casual without their agreement. However, you need to consider whether:
- Their employment contract, registered agreement or award lets you do so without their agreement
- The change makes a new employment contract, or changes the existing contract
- Entitlements like annual leave or redundancy need to be paid out
- You need to provide notice to the employee
However, it is illegal to change or end an employee’s employment:
- For a discriminatory reason
- Because the employee has exercised one of their workplace rights
- For another reason protected by law
If you require more information on these matters, we suggest you seek professional legal advice.
This contract is for employees who are employed under a modern award where the standard award entitlements apply. Full time employee’s usually work at least 38 hours per week and are steadily and continuously employed. They usually have set hours and days of work. Full time employees are entitled to various benefits including sick leave, holiday leave, holiday pay and superannuation.
Permanent or fixed term contract employees
You may also wish to hire employees on a permanent or fixed term contract basis.
Permanent employees remain employed on an ongoing basis until either you or the employee ends the employment relationship, while fixed term employees are employed for a specific period of time (or for a specific task), with their employment ending on a date specified in the contract.
It can be difficult to properly differentiate between an employee and an independent contractor. You can learn more about how to make the distinction here, along with how to avoid entering (and being penalised for) a sham contracting agreement.
Employees hired under a fixed term contract are also covered by the 11 minimum entitlements under the NES.
Suitable for Fixed Term employees employed under a modern award where the standard award entitlements apply.
A Fixed Term Employment Agreement is suitable for use where a staff member is being employed for a set length of time, with a specified end date for the employment. For example, to complete a specific project or to replace staff taking long service or maternity leave.
Distinguish between your employees to meet your responsibilities
One of the best ways to ensure you’re providing your employees with the right entitlements is to establish individual written employment contracts. That way, each of your employment relationships are documented, providing you with an easy means of determining whether you’re meeting your responsibilities as an employer.
If you require more information on your responsibilities under the NES, visit this website, or seek professional legal advice.
This article last reviewed May 2021 by Kirra Griffin
Kirra Griffin is a final-year law student at Melbourne Law School. As our resident legal assistant, Kirra uses her specialised knowledge of the law to translate complex concepts into easily digestible information.