Employment contracts: permanent? fixed-term? casual? Which do I need?

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Employers are regularly confused about the difference between permanent, casual and fixed-term employees, and what kind of staff member they should have. Here’s our guide.

Permanent employee

Hire a permanent employee for full-time or part-time work that needs to be performed on an ongoing basis. If you require someone to do work that you expect to continue indefinitely, a permanent employee is the best option for you.

Fixed-term employee

Hire a fixed-term employee if you require help for a specific period of time. A fixed-term employee will be your best choice where you know the term of the employment will come to an end on a particular date or event, like a seasonal fruit picker, or hiring an employee to cover another employee’s workload while they are away on parental leave.

Casual employee

Hire a casual employee to perform irregular and intermittent work. They are the extra set of hands to call on when a member of staff has called in sick or when you have suddenly realised that you have understaffed a shift. But remember, as a casual employee they are not required to accept the offers of work that you make.

They all need employment agreements!

For all of the types of employees above, you need to provide an individual employment agreement specific to their employee type. There are key details that must be included in the agreement depending on the form of employment. This includes (but is certainly not limited to):

  • Permanent: the agreement must provide a description of the work to be performed by the employee, indicate where the employee will perform the work, detail the arrangements relating to the hours of work the employee is to perform, and outline the wages or salary payable to the employee.
  • Fixed-term: the agreement must clearly state the beginning and end dates/events of the term of employment and specify a genuine reason based on reasonable grounds why the employee’s agreement is for a fixed term.
  • Casual: the agreement must clearly state the intermittent and casual nature of the employment, and that the hours of work and engagements are irregular and uncertain.

Every type of employee listed here needs an individual employment agreement specific to their employee type.

What if I get it wrong?

If you choose one employee type but treat the employee as another, you may face some unwanted consequences.

One of the most common mistakes is where the work of a casual employee is or becomes ongoing and of a regular pattern. In these circumstances your casual employee may actually be a permanent part-timer.

A recent line of case law has dealt with this issue. The consequence? The employers have had to pay their employees 8% by way of holiday pay as a casual, and also provide the employee annual holidays as a permanent part-timer. Be warned.

Another common mistake is not having a genuine reason for a fixed-term agreement, resulting in the employer being expected to treat the employee as a permanent staff member.

Also employers often mistake fixed-term agreements as a way to trial an employee before hiring them permanently. This is not permissible. You should be using a trial period clause in a permanent employment agreement instead.

The take-home message

To choose which type of employee is best for you, put some thought into the type of work you have to offer, how frequently this work needs doing, and for what period of time.

To assist you in this process, and to ensure you are providing the right employee with the right employment agreement, contact our team.