What Are Fixed-Term Employment Contracts? Key Details to Understand

Designed to hire for short-term staffing needs, cover temporary gaps, or bring on specialised talent for specific projects, fixed-term contracts offer a flexible alternative for both employers and employees.

But what are the regulations around fixed-term contracts in Australia? In this guide, we’ll break down everything you need to know about this type of contract—so if you’re a business owner, HR professional, or someone being hired under one, you can understand exactly how it works.

What is a fixed-term employment contract?

The fixed term contract refers to a type of employment agreement where an employee gets hired for a specific period of time, typically six months, a year, or up to a maximum of two years. 

Like other types of employment, workers on fixed-term contracts are still covered by the National Employment Standards (NES)  and must receive the same basic entitlements as permanent staff–and while some fixed-term contracts could lead to ongoing employment, that outcome is never guaranteed.

When should a business use a fixed-term contract? 

Fixed-term contracts are a great option when you need staff for a set period, but not permanently.
For example, they’re ideal for situations like:

• testing out a new role or function before making it permanent.
• covering maternity or paternity leave;
• running a seasonal program or campaign;
• filling in during peak business periods;
• hiring for a specific project;
• bringing on a specialist consultant temporarily; and/or

Fixed-term contract vs permanent contract

Understanding the pros and cons of each can help you choose the right option for your business needs.

Key legal obligations for employers

From December 2023, the Fair Work Act 2009 (Cth) introduced new changes to fixed-term contracts in Australia, stating they cannot run for longer than two years. This limit includes any extensions or renewals.

If you’re hiring someone on a fixed-term basis, there are also a few legal requirements to keep in mind. Here are some points to consider:

1. Provide a well-written employment contract clearly stating:
   • start and end dates;
   • job duties and responsibilities;
   • leave and super entitlements;
   • termination processes (including notice periods or penalties);
   • any included benefits (like allowances or bonuses); and 
   • expectations for behaviour and performance.
     
2. Give the employee a Fixed Term Contract Information Statement
3. Provide the Fair Work Statement
4. Avoid breaching anti-avoidance protections, which means not:
   • ending or breaking up employment simply to restart it later;
   • replacing the worker with someone else in the same role; and
   • restructuring tasks to get around the two-year cap. 

Failure to consider these steps could lead to penalties, disputes, or legal claims.

Employee entitlements: leave, pay and benefits

For employees, fixed-term roles offer a way to build experience, try new industries, or step into project-specific roles. While they may not offer the same long-term perks, they still come with legal protection and entitlements.

One of the main questions regarding this topic is: “Do fixed term contracts get annual leave?” The answer is yes: fixed-term employees who are full-time or part-time enjoy most of the same rights as permanent employees, including:

• annual leave and personal leave accrued pro rata;
• paid public holidays if they fall on a scheduled workday;
• superannuation as required under super laws; 
• pay that meets or exceeds minimums set by the National Employment Standards (NES), awards, or enterprise agreements; and
• work covered by the Fair Work Act for unfair dismissal, discrimination and other workplace rights. 

Other benefits the employer chooses to provide outside the basic entitlements should be clearly stated in the contract.

From a fixed term to a permanent contract 

There are a lot of factors that could lead to permanent employment offers, such as performance or even if the employer develops long-term needs for the role. 

If there’s an offering of a permanent role, it is important to: 

• confirm the new employment terms in writing;
• outline whether the role is full-time or part-time;
• clarify hours of work and starting date; and
• provide an updated contract to be signed by both parties. 

For employees, it’s often a good idea to have that conversation before a current contract ends. Be open about your intentions and keep it professional, employees appreciate clear, direct communication.

Termination rules for fixed-term contracts

Normally, fixed-term contracts simply end on the agreed date—no formal termination notice is required. But, if the contract ends early or is not structured correctly, different obligations may apply.

The contract should generally include:

• grounds for early termination (e.g., misconduct, poor performance, breach of contract);
• process for notice or payment in lieu, if needed; and
• any applicable renewal or rollover clauses. 

Fixed-term employees aren’t usually entitled to redundancy pay unless the contract ends early and the role is no longer needed. However, if the contract exceeds the two-year cap, it may be treated as ongoing which could potentially subject a fixed term contract to redundancy and termination laws.

Force majeure clauses (e.g., for pandemics or natural disasters) can end a contract early, but usually only if specified in the contract. These clauses can protect both parties when unforeseen events prevent the contract from continuing.

Common pitfalls for employers

Some common traps to avoid:

• Exceeding the time limit → You can’t usually keep someone on rolling fixed-term contracts. Two years is the maximum.
• Skipping the paperwork  → Verbal agreements or generic templates can often lead to confusion or legal disputes.
• Unlawful termination  → Ending a contract early without a valid reason can result in claims for unfair dismissal.
• Breach of contract  → Failing to honour what’s written down (e.g. pay, benefits, or notice) can lead to serious penalties and litigation.
• Misusing “gaps”  → Deliberately terminating a contract and rehiring later is generally strictly prohibited.

Final thoughts and legal advice 

Fixed-term contracts in Australia offer great flexibility, but only when used properly. If you’re ever unsure, get legal advice. It’s far better to double-check your contract terms now than deal with a Fair Work claim later.

If you’re hiring under this work arrangement, we can help! H+A Legal can assist by drafting or reviewing fixed-term agreements or if you’re facing a commercial dispute. Reach out to our employment contract and dispute specialists, who can make sure everything works for everyone involved.