In the course of reviewing the recent amendments made to the Fair Work Act 2009 (Cth) (FW Act), an expert review panel noted an unintended consequence of the amendments concerning fixed-term employment was an unacceptable level of anxiety experienced by those who have to deal with the changes.

The changes, which took effect on 6 December 2023, limited the use of fixed-term contracts for greater than 2 years (including renewals or extensions) or beyond two consecutive contracts relating to the same work.

The number of employees on fixed-term contracts has reached its highest level in a decade. Growth has been particularly strong in the education and training sector, and the health care and social assistance sector. These trends may be an unintended consequence, potentially reflecting efforts by employers in exempted sectors to engage employees on fixed-term contracts before the exception period ends.

Fixed-term contracts are more common among professionals than other occupation groups, and consistent with this is a relatively high share of employees whose annual earnings exceed the high-income threshold (meaning they are not covered by the FW Act limitation).

Approximately 50% of employees on fixed-term contracts transition to permanent employment, with only a small proportion moving into casual roles. This transition rate to permanent contracts has remained stable over the past 15 years.

Uncertainties and ambiguities created by the exceptions and extensions have potentially undermined the intended effect of the legislation in the short term. While any new rules are challenging to implement with confidence (in the absence of cases and decisions to assure employers that they are interpreting the requirements correctly), the levels of anxiety experienced by some are clearly an unintended consequence of these amendments.

Many employers remain uncertain about their obligations and the applicability of exceptions. For instance, while employees engaged in training arrangements (e.g. apprenticeships) are exempt, there is a perceived ambiguity or gap about whether this exception extends to employees in graduate programs or students on internships. Some industries are struggling to adapt their operations and budgeting practices to accommodate a shift towards employing more staff in ongoing roles. Employers have also reported that, in response to the changes, some employers are employing fewer workers or factoring potential redundancy costs into their financial planning − particularly when applying for government funding.

The review recommended that consideration be given to making the exceptions clearer (e.g. the government funding exception) or increasing the 2 years and two renewals threshold. Alternatively, the current FW Act framework should be replaced by a principles-based approach that gives the Fair Work Commission more powers and responsibility (e.g. through modern awards).