Understanding the Fair Work Rules for Fixed Term Contracts

Facebook
Twitter
LinkedIn
Last updated: November 2025
From 6 December 2023, major reforms under the Fair Work Act 2009 (Cth) limit how employers across Australia can use fixed term contracts. These changes are designed to provide greater job security for employees and to reduce the repeated use of short-term contracts for ongoing work.
At Explore Potential Consulting (EPC), we’re helping employers and employees navigate these new obligations — ensuring contracts, renewals, and extensions all comply with Fair Work requirements.
What Is a Fixed Term Contract?
A fixed term contract is an employment agreement that ends after an identifiable period — for example:
  • a set date or timeframe (e.g. 12 months), or
  • the end of a project or season.
Fixed term employees (full-time or part-time) generally receive the same conditions as ongoing employees, including leave entitlements. However, their employment automatically ends at the contract’s expiry date (unless that clause breaches new Fair Work rules).
Casual employees can also be engaged on fixed term contracts, except in certain higher education roles.
Key Limitations Under the Fair Work Act
From 6 December 2023, new limitations apply. Employers cannot engage a worker on a fixed term contract that:
  1. Exceeds two years in total (including any extensions or renewals).
  2. Includes more than one extension or renewal option.
  3. Creates a consecutive series of contracts for the same or similar work where substantial continuity exists.
If these rules are breached, the contract will not automatically end at the nominated expiry date — meaning the employee may be considered ongoing.
Example
Ahmad is employed on a one-year fixed term contract, extended once for another year. His employer then offers a new one-year contract for the same role.
This breaches Fair Work’s limitations because:
  • the total employment period exceeds two years,
  • the initial contract had an extension used, and
  • the role remains the same.
Exceptions to the Rules
The Fair Work Act recognises that some roles legitimately require fixed term arrangements. Exceptions include:
  • Specialised project work requiring specific skills.
  • Formal training arrangements, such as apprenticeships and traineeships.
  • Essential or seasonal work (e.g. ski instructors, harvest roles).
  • Temporary replacement for an employee on extended leave.
  • High-income employees (above the Fair Work high-income threshold).
  • Roles funded by time-limited government or philanthropic grants.
  • Governance positions, such as board appointments.
  • Certain awards that specifically allow longer fixed term arrangements (e.g. in higher education).
  • Organised sport and major international event roles.
Additional temporary exceptions (Nov 2024–Nov 2026) also apply to:
  • Charity and not-for-profit organisations with less than $10 million annual revenue, and
  • Medical or health research organisations with less than $100 million annual revenue,
    where work is tied to specific government or philanthropic funding.
What If the Contract Doesn’t Meet the Rules?
If a fixed term contract doesn’t comply with these limitations or exceptions:
  • The end date is no longer valid, and the employment does not automatically terminate.
  • Civil penalties may apply to the employer or business.
  • The employee may gain ongoing employment status and access to full Fair Work protections, including unfair dismissal rights.
Disputes and Resolution
If there’s disagreement about whether a limitation or exception applies:
  1. The issue should first be discussed and resolved in the workplace.
  2. If unresolved, either party may refer the dispute to the Fair Work Commission (FWC).
  3. The FWC can assist through mediation, conciliation, or (by agreement) arbitration.
Employers must provide evidence to demonstrate that an exception legitimately applies — such as funding contracts, financial reports, or project documentation.
Anti-Avoidance Protections
Employers cannot avoid these rules by:
  • ending employment to rehire the same person later,
  • engaging someone else for the same or similar work, or
  • changing the job title or employment type purely to bypass the limitations.
Such behaviour may constitute adverse action, attracting serious penalties under the Fair Work Act.
Getting Support
Employers must provide new fixed term employees with the Fixed Term Contract Information Statement (FTCIS) in addition to the Fair Work Information Statement (FWIS) at the start of employment.
For further details:
  • Or contact Explore Potential Consulting for tailored guidance on:
    • Updating employment contract templates
    • Managing extensions and renewals lawfully
    • Preparing documentation for Fair Work compliance and audits
Get File