Significant amendment to fixed term contracting legislation – charity concessions

Last year the FairWork Commission introduced changes to the FairWork Act, which related to engaging employees on fixed term employment contracts. Effective 6 December 2023, the rules limited when fixed term contracts can be used and introduced a cap of 2 years on the length of fixed contracts.

However, these rules posed challenges for the NFP sector, which may have legitimate reasons for using fixed-term contracts over longer periods of time (particularly when the contract term is tied to funding arrangements for the organisation).

The 2023 laws have now been amended to reflect these funding realities in the sector. The changes allow NFPs to align employment contracts with funding periods (with some conditions). Below we recap the 2023 laws (or ‘limitations’), as well as the amendments for the sector.

A recap on the limitations – effective December 2023

• A fixed term contract can’t be for longer than 2 years (this includes any extensions or renewals)
• A fixed term contract can’t have an option to extend or renew the contract, so the period of employment lasts for longer than 2 years
• A fixed term contract can’t be extended or renewed more than once

New for NFPs – exceptions to the limitations

From 1 November 2024, NFPs are covered by new exception rules. This means they can align the employment contract with the funding period, as long as the employment contract in question fits into this set of conditions:

• The employee’s position is funded by government funding (completely or in part), or via philanthropy
• The funding is for more than 2 years

These exceptions will be available for an initial period of 12 months, at which point we understand the concessions will be reviewed.

Balancing measures (exceptions to the exceptions!)

‍The exceptions do have a number of balancing measures that are positive in our view, as they will prevent organisations from using fixed term as a default contract type for all staff. Balancing measures include the following:

• The entity can’t keep using fixed term contracts if the program has been running for more than 5 years, or if the staff member has been employed for more than 7 years
• There is a stipulation that staff contracts receiving the exception have to be linked to the specific program funding source

See here for the full legislation covering these amendments.