Casual employees: 6 ways the Australian law has now changed
On 27 March 2021 amendments to the Fair Work Act 2009 came into effect which significantly changed the way the law operates in respect of casual employees.
In this article, Simon Obee (Head of Professional Services at Employment Innovations and Principal Lawyer at EI Legal) talks us through the changes which will affect every employer who engages casual employees.
1. Casual conversion – steps that must be taken before 27 September 2021
Probably the most misunderstood new obligation to be introduced is the requirement to “convert” certain casual employees to permanent (full-time or part-time) employment.
Employment Innovations has produced a free guide and flowchart to take you through all the relevant steps, but we explain the basic requirements below.
For businesses with 15 or more employees there is a one-off obligation to give written notice to every casual employee in your workforce who was employed on or before 27 March 2021, as to whether they are entitled to convert to permanent employment or not. This needs to be done on or before 26 September 2021.
The criteria that must be used to decide whether a casual employee is to be offered conversion to permanent employment is:
(a) Have they been employed for at least 12 months?; and
(b) In at least the last 6 months have they worked a regular pattern of hours which they could continue without significant adjustment as a part time or full-time employee?
If using KeyPay, users can assess the regularity of hours using the timesheet report. This report allows users to look at timesheets over the 12 month period for specific employees, listing every timesheet for that employee by date. Employers will be able to assess that and see how many days the employee has worked, and whether a ‘regular’ pattern occurs.
If the answer to both questions is “yes” then they must be offered conversion to permanent employment on or before 26 September 2021, unless there are “reasonable grounds” for not making the offer. “Reasonable grounds” include where the employer knows that the requirement for the employee to continue to work a regular pattern of work will cease in the next 12 months.
If they are not going to be offered conversion (either because they have not been employed long enough, have not been working a regular pattern of hours or because there are reasonable grounds for not making the offer) they must be informed of this in writing on or before 26 September 2021.
2. Casual conversion – obligations from 27 September 2021 onwards
Going forward, from 27 September 2021 onwards, businesses with 15 or more employees will be required to offer casual conversion to permanent employment within 21 days of a casual employee having been employed for 12 months, so long as in at least the last 6 months they have worked a regular pattern of hours which they could continue without significant adjustment as a part time or full-time employee.
Again, there are exceptions from having to make the offer where there are “reasonable grounds” for not doing so, or where the employee has previously refused an offer of conversion. There is an obligation to inform employees in writing as to why they are not being offered conversion within 21 days of their 12 month anniversary.
Employees generally only have to be offered the opportunity to convert once, but are able to request conversion once every 6 months thereafter.
In light of the above, it will be very important going forward, for employers to have a system in place whereby they are alerted to a casual employee reaching their 12 month anniversary so the employer can make an appropriate offer of conversion, if required to do so.
This can be easily automated in KeyPay using the calendar feeds functionality for work anniversaries.
3. Casual conversion – small business employers
The obligations for small business employers (those with less than 15 employees) are similar but not identical to those set out above. For small businesses there is no positive obligation to offer conversion, rather they must consider any request for conversion that they receive from a casual employee.
As above, casual employees can only request conversion if they have been employed for at least 12 months and in at least the last 6 months have worked a regular pattern of hours which they could continue without significant adjustment as a part time or full-time employee.
Again, a request can be refused on “reasonable grounds” and employees are not entitled to make another request for a further 6 months. Reasons for refusal must be given in writing.
4. A new statutory definition of casual employment (at last!)
Another key change to the legislation is, for the first time, there is a definition of what “casual employment” actually means. Previously, employers had to look at successive decisions of courts and tribunals to try and determine what a true casual employee “looked like”, which caused considerable uncertainty, to say the least.
The new definition of casual employment in the Fair Work Act is where an employee has accepted an offer of employment “on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work”.
In assessing whether the employment relationship satisfies this test, only the following factors can be taken into account:
(a) whether the employer can elect to offer work and whether the employee can elect to accept or reject work;
(b) whether the employee will work as required according to the needs of the employer;
(c) whether the employment is described as casual employment (eg in the contract of employment);
(d) whether the employee will be entitled to a casual loading or a specific rate of pay for casual employees.
The relevant time for assessing whether an employee is a true casual is now when their employment commences. What happens subsequently (such as the employee happens to start working a regular pattern of hours) can no longer be taken into account.
It is hoped that the new definition will create greater certainty going forward and will reduce the risk of employees being engaged as casuals and later on being found, in reality, to be permanent employees (with risks of back pay obligations on the employer).
What the changes do mean is that employers should review their current casual employment contracts and make sure they align with the new definition. Employment Innovations has a free casual employment contract, updated with all the relevant changes, available here.
5. No casual “double-dipping”
Another key legislative change is to prevent a casual employee who is later found to be a permanent employee, from “double-dipping” on entitlements. This will enable an employer to offset any casual loading paid to an employee against permanent employment entitlements that they may later seek to claim (paid annual leave or personal/carer’s leave, redundancy pay, notice of termination, etc).
Put simply, the law now dictates that an employee cannot have the benefit of both a casual loading and permanent employment entitlements: it’s one or the other.
Although the Government previously introduced similar legislation to tackle this issue, it was found to be ineffective in the WorkPac v Rossato case. The new legislation puts this right.
In order to get the benefit of this protection, it is important that casual employment contracts separately identify the amount of casual loading paid and clearly state it is paid to compensate an employee for not receiving permanent entitlements (paid leave, redundancy pay, notice of termination). Employment Innovations’ free casual employment contract template includes all the relevant clauses.
6. Casual Employment Information Statement
Employers will already be familiar with the requirement to provide all new employees with the Fair Work Information Statement. Since 27 March 2021, new casual employees will now also need to be provided with a Casual Employment Information Statement (CEIS).
For existing casual employees (employed on or before 27 March 2021), small businesses must provide the employees with the CEIS as soon as possible after 27 March 2021 (ie now!). Non-small business employers must provide the CEIS as soon as possible on or after 27 September 2021.
Using the document functionality in KeyPay and WorkZone, employers can make sure any new employee that comes on board has automatic access to the CEIS. They’ll also be able to manage this by employee group so only casual employees see the document. Having this in the business documents section of KeyPay means employers don’t have to worry about doing individual, manual document handouts. They can also set it up so employees have to acknowledge the document if they choose.
About Employment Innovations and EI Legal
Employment Innovations and EI Legal exist to make employing staff as easy as possible. If you would like to hear about our workplace advice services, to get access to template HR documents (including all the documents you will need to fulfil your casual conversion obligations), or to speak to an employment lawyer, our contact details are firstname.lastname@example.org or 1300 144 120. We also offer free 1:1 consultation with one of our HR Experts.