What is a fixed term employment contract

A fixed term employment contract is agreement between an employer and employee that has a start date and an end date. This means that the contract expires at the end date, creating a “fixed term” of employment, unless the contract is renewed or extended by agreement between the parties for a further fixed term.

Update on the law relating to fixed term employment contracts

Fixed term contracts entered into after 6 December 2023:

1. cannot be for a period of more than 2 years, including renewal and extension periods.
2. Updated anti avoidance provisions set out penalties for employers who try to circumvent the limitation period by: delaying re-engaging an employee; or not re-engaging the same employee and instead engaging a new employee to do similar work or terminating employment.
3. Employers must provide any fixed term engaged employees a Fixed Term Contract Information Statement.

How the limitation periods work

Employers cannot offer employees a new fixed term contract after the cessation of their original one if:

1. Their previous contract was also for a fixed term of 2-years (including renewal and extension periods);
2. Their previous contract and the new contract are for the same work; and
3. There is ‘substantial continuity’ in the employment relationship between the previous and new contracts.

Exceptions to the limitation periods

In some of the following circumstances, limitation periods will not apply if the employee is:

• In certain circumstances, sectors and for certain types of employees;
• engaged to perform a particular task with a special skill;
• in a training arrangement;
• covered by an award that states otherwise;
• engaged to undertake essential work during a peak period; or
• above the high income threshold.

Fixed Term Contracts after 1 November 2025

As the law currently stands, exceptions to the limitation periods will not apply for fixed term contracts entered into after 1 November 2025. This means that if an employee is engaged beyond the stated fixed term period, the agreement will not be counted as invalid. Instead, it will be treated as if it was a permanent agreement, and the rest of the contract will remain valid except for the fixed term clause.

Grazia Legal can assist employers by:

• drafting bespoke fixed term contracts to suite your business needs;
• assessing if fixed term contracts are valid; and
• determining what exceptions apply to your industry.

Please call Grazia Legal or visit our website to submit an enquiry.

Disclaimer: The information in this article is of a general nature. It does not constitute formal legal advice, and should not be relied on as such.  Please contact Grazia Legal for tailored legal advice.