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Casual Employment Changes: How Do They Affect SMEs?

casual employment changes

Casual employment has been a contentious issue as the definition of casual employment was not clear in the past. In March 2021, the Australian Senate passed a reduced version of the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill, also called the Industrial Relations Omnibus Bill. While most of the intended legislation was dropped, the portion of the bill addressing casual employment passed. Here we provide a brief overview of the changes and what these could mean for SMEs.

Casual employment changes in four areas

Four key amendments were made to the Fair Work Act 2009, under the lR Omnibus Bill that affect casual employment. These include:

  • Introducing a ‘casual employment’ definition
  • Enabling employers to retrospectively offset entitlements claimed against the 25% casual loading already paid to the employee in cases where the employee has incorrectly been classified as casual
  • Giving casual employees extended rights relating to converting from casual employment to permanent after 12 months of employment. Now applicable to National System Employees, not only those covered by Modern Awards
  • Requiring employers to provide a Casual Employment Information Statement (prepared by the Fair Work Ombudsman) to their casual employees.

Definition of casual employee

Under the changes, ‘casual employee’ will be defined under the Fair Work Act based on the following criteria:

  1. ‘an offer of employment is made on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work; and
  2. the person accepts the offer on that basis; and
  3. the person is an employee as a result of that acceptance.’

The general impact of this definition is that an employee is considered a casual employee if there is not an advance commitment made to providing continuous work for an indefinite period. In addition, a regular pattern of hour work does not indicate a firm advance commitment to ongoing and indefinite work. 

Basically, the offer and acceptance of employment determines whether the employee is casual, not the conduct of the employer and employee that follows. 

Entitlement offset against casual loading

In the past, when an employee was incorrectly classified as a casual employee and they sought compensation in court, they could get the entitlements owed as a permanent employee plus keep the loading they had received as a  casual employment entitlement. As a result of the changes, this form of double dipping will not be possible. If the employee makes a claim for an entitlement, any payment will be reduced by the casual loading amount (usually 25%). These entitlements include:

  • Annual leave
  • Compassionate leave
  • Payment for absence on a public holiday
  • Payment in lieu of notice of termination
  • Personal/ carers leave
  • Redundancy pay.

Casual conversion rights expanded

Under the updated regulations, the employer is required to offer a full-time or part-time role under certain conditions. These include: 

  • Being employed for a 12-month period, and
  • In the last six months in that role they have worked,
    • a regular pattern of hours over the past six months
    • the employee could continue working these hours in a part-time or full-time capacity without making significant adjustments. 

An employer is not allowed to terminate an employee, or reduce or vary their hours, in order to avoid rights to convert from casual employment. In addition the right to casual conversion is considered a workplace under the general protection provisions of the Fair Work Act. 

Small businesses (defined as having 15 or fewer employees) are exempt from having to offer conversion from casual status after 12 months, but employees can still request conversion from casual to permanent. 

After 12 months, an employer is not required to make an offer for casual conversion if reasonable business grounds exist not to make the offer. These ‘reasonable grounds’ are based on facts that are known or reasonably foreseeable.  These reasonable grounds include whether:

  • The employees position will continue to exist after the 12-month period
  • There will be a significant reduction in the hours the employee is required to work
  • There will be a significant change in the days and times required to work, and the employee is unable to work them
  • Making an offer would not be in compliance with the selection or recruitment process under state or federal law. 

Businesses that don’t have reasonable grounds not to make a conversion offer and have more than 15 employees are required to make an offer of conversion to permanent status within 21 days of the person being 12 months in casual employment. The offer must be based on the hours that the casual employee has worked. The casual employee has 21 days to accept or reject the offer. If an employee doesn’t respond within that time, it is assumed that they have rejected the offer. 

When an employee is not required to make an offer – based on reasonable grounds or because the casual employee did not work a regular pattern during the past six months – the employer must notify the casual employee within 21 days why they are not being offered conversion from casual to permanent employment. 

While employers must offer casual conversion after 12 months or explain why they are not required to, casual employees have the right to request casual conversion in writing if they meet the eligibility requirements, as well as: 

  • The employee has not refused the employer’s casual conversion offer in the past six months, and
  • The employer has not provided notice to the employee that they won’t offer casual conversion to permanent for business reasons, and 
  • The employer has not refused a previous request from the employee
  • The employees request has not been made within the 21-day period after the employer has made the offer according to the 12-month requirement.

Keep up to date with the changes to casual employment rules

As this is new legislation, additional information and tools are being released. Visit the Fair Work Ombudsman’s website for the latest updates.

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