Are fixed term contracts negatively impacting job security and wages? This is a current conversation within political discussions and it is likely that we will see changes that impact associated legislation, and ultimately many businesses.
What is a fixed term contract? A fixed term contract is an agreement between an employee and employer, that defines a working relationship that has an agreed termination date, in which it is at the employer’s discretion to renew the contract of employment.
The suspected problem stands within the misuse of the fixed term contract, with suspicion that some employers are using this as a means to create an extended probation period by locking in contracts for only 12, 18 or 24 months. This in turn provides the employer the opportunity to end the employment relationship with no grounds for unfair dismissal. It has been determined by Treasury that the fixed term contract creates uncertain work stability, disempowers the employee, and decreases the opportunity for wage or role progression.
Unfortunately, whilst some are misusing this process, other organisations rely upon the use of these contracts, as the business funding and organizational needs fluctuate in response to external factors. When used correctly, the fixed term contract is meant to increase job and wage security by providing confident and stable work for employees that would otherwise only be offered casual positions.
Reform is likely and this will potentially see limits placed on how many fixed term contracts an employer can offer when there are multiple employees in the same role, with a minimum contract term introduced. Application for special circumstances may be required if wishing to hire beyond the set minimums and terms.
Assurance HR Management will continue to keep you updated, notifying you when further action is initiated surrounding the suggested reform. If you have any queries or wish to review your current employment contracts, we have a wealth of expertise in this area and can assist you in effectively managing the employee and employer relationship. Contact us today on 1800 577 515 to have a free consultation with one of our HR specialists.