Types of Employment Contracts in Australia: A Complete Guide

In Australia, employees can be hired on various types of employment contracts, from full-time, part-time and casual, to temporary contracts. This guide explains the different types of employment contracts in Australia and helps you choose the right contract for the new hire in your business.

Understanding Employment Contracts in Australia

Full-Time Employment Contracts

Key Features of Full-Time Contracts

Full-time employees usually work 35 to 38 hours a week, but the actual hours of work depend on the specific job and industry. Hours are typically agreed upon between the employer and employee. This contract is usually permanent, which means the job is ongoing until either party decides otherwise. This contract is ideal for core business roles.

Rights and Entitlements

Full-time permanent employees receive a range of entitlements designed to provide long-term financial and personal security. This includes superannuation, with employers currently required to contribute a minimum of 12% of an employee’s base pay to their super fund to support retirement savings. Employees are also entitled to four weeks of paid annual leave each year, 10 days of personal or carer’s leave, paid public holidays and long service leave, which is available to most employees after an extended period with the same employer or industry (depending on the state or industry). Parental leave is available for new and expecting parents. 

In addition, both employers and employees must give a notice period when ending employment. In some circumstances, employees may be eligible for a redundancy payment, which compensates them when their role is no longer required. Full-time employees also have access to unfair dismissal protections after completing a minimum employment period.

Part-Time Employment Contracts

How Part-Time Contracts Differ

Part-time employees work regular, predictable hours, but fewer than full-time hours. Unlike casual employees, part-time workers have an ongoing employment relationship with predictable hours. This works great for businesses that need consistent coverage but not someone full-time, providing employees with job security and regular income. Some examples include customer service positions during peak trading periods or specialist roles that don't require full-time attention.

Pro-Rata Entitlements Explained

Leave for part-time employees is paid on a pro-rata basis, which means that leave is calculated proportionally to hours worked. For example, an employee working 20 hours per week (approximately half of full-time hours) would be entitled to around two weeks of annual leave instead of four. Long service leave is also provided on a pro-rata basis. However, part-timers get the same super percentage and similar notice periods as full-timers.

Part-time employees have the same protections under the Fair Work Act as full-time employees, including access to unfair dismissal provisions. They cannot be treated less favourably simply because they work fewer hours, so they have access to training and can be considered for promotion opportunities like their full-time counterparts.

Casual Employment Contracts

Casual employees are offered work when needed. There are no guaranteed hours or ongoing commitment. This contract is suitable for businesses with fluctuating or unpredictable workloads, such as those in hospitality and retail.

Casual work means that employers can adjust staffing levels according to demand without the obligation to provide ongoing work. Employees have the freedom to accept or decline shifts and may work for multiple employers simultaneously.

Casual Loading and Benefits

As casual work is flexible, casual employees do not get paid leave. To compensate for the lack of paid leave, casual employees are paid a 25% casual loading; the hourly rate is higher than equivalent full-time/part-time roles to compensate for the lack of leave. They don’t get paid annual leave, sick leave or public holidays. Superannuation still needs to be paid if the employee is earning over the threshold. Irregular hours can suit certain lifestyle preferences, such as students balancing studies and work or parents managing childcare responsibilities.

Casual employees have the right to request permanent employment, like part-time or full-time contracts, if they have worked regular hours for at least 12 months.

Fixed-Term Contracts

Fixed-term contracts are for employment that lasts for a specified period or until project completion. There is a clear start and end date in the contract. The fixed-term contract can be worked at full-time or part-time hours. Employees usually cannot be terminated early without grounds for dismissal. These contracts can be used for temporary business needs or specific projects.

When to Use Fixed-Term Agreements

Fixed-term agreements can be used to cover periods of higher demand or fill staffing gaps. Periods of higher demand include seasonal work, trial periods for new business initiatives, and specific projects with defined timelines. Staffing gaps include covering staff on parental leave, filling gaps while recruiting permanent staff and staffing grant-funded positions with limited tenure.

These contracts provide businesses with the flexibility to bring in additional resources or specialist skills for a defined period without the commitment of permanent employment. They're particularly useful in industries with project-based work, such as construction, IT, and events management.

Limitations and Compliance Considerations

Fixed-term agreements are subject to specific limitations to ensure they are used appropriately. They generally have a maximum duration of two years unless there is a genuine operational need and they cannot be used repeatedly to avoid permanent employment obligations. Employees may have unfair dismissal rights at the end of a fixed-term contract and employers must still provide the required notice or payment in lieu when the contract ends. Redundancy provisions may also apply if the contract is terminated early. Clear documentation of the genuine business reason for using a fixed-term arrangement is essential to comply with employment laws and reduce legal risk. 

Maximum Term Contracts

These contracts specify a maximum term rather than a fixed end date. They are usually reserved for senior roles or specific industries and are less common in standard employment arrangements.

Understanding Maximum Term Agreements

A maximum term agreement sets an upper limit on the length of employment but allows either party to end the contract earlier with notice, offering more flexibility than a fixed-term contract. These agreements often include specific termination clauses, outlining the required notice periods and conditions for ending employment before the maximum term expires. They may also include performance review points or extension options, enabling employers and employees to reassess the arrangement partway through.

Industry-Specific Applications

Maximum term agreements are commonly used for senior executive roles with tenure limits, particularly in government and public sector positions. They are also common in academic and research appointments, as well as for contract CEOs and managing directors. Some roles are governed by legislation or regulations to ensure roles remain fair, accountable and appropriately structured for projects or programs that involve significant public or private funds.

Choosing the Right Employment Contract for Your Business

To pick the right employment contract, start by looking at your business needs. Think about recent workload patterns to decide if roles should be ongoing or temporary, and consider the cost of each type of employment. 

Look at the skills needed, whether specialist expertise or regular operational work, and be aware of the administrative and legal requirements for each contract type. Consider employee preferences and the flexibility your business needs, too. Keep in mind industry standards and long-term workforce planning, and make sure your contracts meet legal obligations, including workplace health and safety and insurance. These are important to avoid risks to your business’s reputation.

Common Pitfalls to Avoid when Drafting Employment Contracts

When preparing employment contracts, businesses must be careful to avoid misclassifying employees, particularly distinguishing between casual, part-time and full-time roles.

Contracts should include all mandatory clauses required by law, clearly specify hours, duties and remuneration, and provide the Fair Work Information Statement to new employees. It is also important to specify probationary periods, intellectual property ownership for work created during employment and clear dispute resolution procedures. Avoid overly restrictive clauses that could be deemed unfair or unenforceable, such as excessive non-compete provisions that prevent employees from earning a livelihood in their field.

Overusing fixed-term contracts to avoid permanent obligations, underpaying entitlements such as superannuation or loadings, and relying on outdated templates or verbal agreements can all create legal risk. Businesses should also ensure contracts are updated when circumstances or legislation change, and avoid copying contracts from other organisations without legal review. Employment contracts should also address contemporary work arrangements, including the use of flexible work arrangements and company technology.

How HumanX HR Can Help with Employment Contracts and HR Compliance

Keeping up with Australia’s ever-changing employment laws can be complex and time-consuming. Non-compliance carries serious risks, including financial penalties, legal action and reputational damage.

HumanX HR’s team of experts provides tailored employment contracts and regular reviews to ensure your business stays fully compliant. We offer ongoing HR support across the entire employee lifecycle, giving you the confidence that your employment relationships are legally sound. By outsourcing your HR to HumanX HR, you can reduce administrative burdens, focus on growing your business and enjoy peace of mind knowing you’re backed by professional expertise.

‍Contact HumanX HR today for expert guidance on types of employment contracts and comprehensive HR solutions designed for your business.