Sometimes employers want to hire an employee for a short or
specific amount of time. This could be for a short-term project or
for work that is seasonal in nature. In these cases, it is
important to know what kind of employment
contract is best for the situation.
Employers will generally have two options – fixed term or
maximum term contracts. We explain the differences between each as
well as the advantages and disadvantages that come with them.
A fixed-term contract means both parties agree that the
employment will last for a specified period of time with a fixed
start and finish date in the contract. One of the main features of
this employment contract is that both parties have relinquished the
right to terminate employment without a proper reason or cause.
However, sometimes an employer may have the right to terminate
employment on specific grounds, such as serious misconduct or poor
performance occurring for a certain period of time. Outside of
these specific grounds for early termination, both parties assume
the employment relationship will last for the period outlined in
Useful for temporary work or to cover another employee's
parental or long service leave
Option not to renew the contract once it ends, meaning there is
no risk of an unfair dismissal claim, or redundancy pay claim
Employees under this contract are excluded from some
entitlements under the National Employment Standards, such as
Unless agreed upon by both parties, or in cases of serious
misconduct or incapacity, a fixed-term contract is unable to be
terminated before its nominated expiry date
Employers may be liable under unfair dismissal provisions if
the employee has had several fixed-term contracts renewed and has a
reasonable expectation that they would continue to be renewed
It is also important to note that employees who have had a
long-term relationship with their employer through multiple,
consecutive fixed-term contracts are likely to be regarded as
permanent employees by the Fair Work Commission. This means that
they may be entitled to redundancy and termination notice under the
National Employment Standards.
When a fixed-term contract is deemed appropriate, employers
should consider limiting it too a modest time period where
possible. They should also ensure appropriate safeguards are
included in the formal contract, including termination for
misconduct, incapacity or poor performance.
Like a fixed-term contract, a maximum-term contract specifies a
date on which both parties agree employment will end. Unlike a
fixed-term contract, however, both parties have the right to
terminate employment without cause or a reason by giving an agreed
amount of notice.
Has all the advantages of a fixed-term contract with the added
ability to terminating the contract prior to the nominated expiry
Flexibility for both parties
Employees can lawfully terminate the contract for any reasons
within the nominated term.
Has all the disadvantages of a fixed-term contract including a
requirement to provide entitlements in long-term relationships and
being subject to unfair dismissal claims if terminated before the
end of the term.
The Fair Work Commission keeps a watchful eye over employers who
try to use these contracts to avoid complying with the National
Employment Standards. A well-written contract that is appropriate
for the circumstances is the key to a successful employment
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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