Currently, I am getting an increasing amount of SMB owners who are grappling with the right employment agreement to offer their potential new employee, there have been some changes.
As a small to medium sized business owner, managing your workforce comes with many responsibilities—and one of the most important is choosing the right type of employment contract for each worker. With the introduction of the “Closing the Loopholes” legislation, it’s more important than ever to understand the different types of employment contracts and the legal implications of each—especially given recent changes to how casual and fixed-term employment is defined.
Here’s a breakdown of the main types of employment contracts available, and what you need to know about each in light of the new legislation.
1. Permanent (Ongoing) Employment
These contracts provide employees with ongoing employment until it is terminated by either party. Permanent employment can be full-time or part-time and includes:
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A regular and predictable pattern of hours
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Paid leave entitlements (annual, personal, parental, etc.)
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Minimum notice periods and redundancy entitlements (where applicable)
If a role includes a clear commitment to ongoing work, it should not be classified as casual or fixed-term unless it fits specific legal criteria.
2. Casual Employment – New Definition Now Applies
Casual employment has traditionally meant work that is irregular, ad hoc, and without a firm commitment from the employer. Casuals:
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Have no guaranteed hours of work
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Can accept or decline shifts
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Don’t receive paid leave entitlements
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Receive a casual loading to compensate for lack of benefits
What’s changed?
Under the Closing the Loopholes legislation, casual employment is now defined by the real nature of the working relationship—not just what's written in the contract.
If a worker:
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Has a regular, predictable pattern of work, and
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There is a firm advance commitment to ongoing employment
… then they may no longer be considered casual, even if they were originally hired as one.
Implication for small businesses:
You must regularly assess whether your casual employees still meet the legal definition of casual. If not, you may be required to offer them permanent employment.
3. Fixed-Term Contracts – Now Restricted to Two Years
Fixed-term contracts are used when employment is for a defined period or specific project—for example, covering parental leave, peak seasons, or project-based roles. These can be full-time or part-time.
What’s changed?
The new legislation limits the use of fixed-term contracts to:
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A maximum duration of two years, and
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A maximum of two consecutive contracts for the same role
Some exceptions apply (e.g. temporary replacements, government-funded projects, or specialised roles), but for most small businesses, rolling over fixed-term contracts is no longer allowed.
Implication for small businesses:
If you’ve been using fixed-term contracts as a workaround to avoid offering permanent employment, you’ll need to reconsider your workforce planning and ensure contracts comply with the new limits.
4. Independent Contractors
Independent contractors are not employees. They:
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Run their own business
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Have control over how and when work is done
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Invoice for services
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Provide their own tools and equipment
However, it’s important to ensure that someone you classify as a contractor isn’t, in reality, an employee. Sham contracting arrangements can lead to significant legal penalties.
With increasing scrutiny on worker classification, especially around control, independence, and economic dependency, make sure you have clear agreements and working arrangements in place.
Why This Matters for Small Business Owners
Misclassifying workers can expose your business to:
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Backpay claims for entitlements
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Fines and penalties
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Costly legal disputes
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Reputational harm
The Closing the Loopholes legislation is designed to protect workers from being incorrectly classified and to ensure job security where appropriate. As an employer, it’s crucial to stay informed and compliant.
