The latest amendments to the Fair Work Act 2009 (Cth) (Fair Work Act) include a new legal definition for casual employment, offer clarity around casual arrangements and remove the risk of ‘double dipping’ when it comes to entitlements.
While the changes are positive ones, there are a few key things that businesses and their advisers need to know before the transition period ends on 27 September 2021.
We turned to Susanna Richie, Director of Workplace Wizards, to share her perspective on the key changes. Here is a summary of the conversation:
What is the definition of a casual employee and why was this required?
Up until now, there has been no clear definition of what is “casual employment”. There were plenty of court cases which set out the common law principles judges apply when determining if someone is a casual employee or not. However, there was no explicit definition.
All of this has caused significant uncertainty and controversy for many employers and workers, and has culminated in recent appeals to the High Court of Australia. In decisions such as the 2020 WorkPac v Rossato case courts have found that a casual employee may actually be considered ‘permanent’ (and as such entitled to paid leave), if their employment arrangement is in ‘substance’ that of a permanent employee. These sorts of decisions have opened up substantial risks of underpayment and potential for ‘double dipping’ in situations where an employee seeks compensation for unpaid leave and other entitlements on top of the casual loading they’ve already been paid.
The new definition that has been inserted into the Fair Work Act provides one clear definition that states a casual employee is someone who ‘accepts a job offer, knowing that there is no firm advance commitment to ongoing work with an agreed pattern of work.’
What is casual conversion and which employees are eligible?
There have been concerns about the rights of casual workers in an increasingly casualised workforce here in Australia. Many long-term casuals remain in insecure employment even if they have continued to work in the same role for the same employer. Accordingly, Federal Parliament decided it was time to intervene to address some of these issues.
In order to better protect the rights of casual employees, the Fair Work Act now provides that a casual employee can “convert” to being a permanent employee through either an employer offering a permanent position, or an employee requesting a permanent position.
Employers must make an offer for their casual employee to become permanent if:
- The casual employee has worked with you for at least 12 months
- They’ve worked in a regular pattern of hours for at least 6 of those months
- They continue to work those hours as a permanent employee without significant changes
You do not have to extend this offer to your casual employees if you are a small business owner (have less than 15 employees) or if you have reasonable grounds not to.
However, casual employees of small businesses can make a request themselves if they meet the above requirements.
What happens if employers have casual employees who are later found to be permanent employees?
As mentioned, a key part of the new reforms was to resolve the ‘double dipping’ issue of employers needing to provide paid leave entitlements to employees who are later found to be permanent employees even after paying casual loading. So now, where an employee is found to not be a casual employee, their employer can offset any entitlements they owe with the amount the employee has earned in casual loading.
What actions should employers be taking right now?
Employers should be checking their existing arrangements to ensure they satisfy the new definition of casual employment. They should also be looking at implementing payroll or other processes which will enable them to identify when they should be converting casual employees to permanent ones.
Employers now need to give their existing and new casual employees a ‘Casual Employee Information Statement’. This statement includes information such as when an employer should make an offer, when an employee can request a conversion and what to do when there is a disagreement. Small business employers should have already provided this statement to their casual employees while other businesses need to do this as soon possible after 27 September.
In addition, businesses with 15 or more employees need to decide whether they will offer their existing casual employees a permanent position. This decision needs to be made before 27 September in relation to any casual employees who started before 27 March.
How might these changes shape future hiring practices? For example, do businesses need to change their approach to better determine whether employees should be casual or not?
It’s important for employers to think about what it is they really need and establish the right contract with an employee at the start. This will reduce headaches including financial or reputational ones later on down the track.
Then, once a new team member is onboarded, an employer will also need to frequently review what’s actually happening. If something walks like a duck, swims like a duck, and quacks like a duck, it’s a duck and that’s how the courts are likely to view it. This means it’s important to continually monitor if and when any of your casual conversion obligations have been triggered throughout the course of each casual worker’s employment.
I’d also caution that a similar approach should apply when hiring contractors. Employers shouldn’t think that they can just hire contractors to avoid their employment obligations and not have to worry. Instead, they really need to carefully consider the nature of each engagement and satisfy themselves that it really is a contractor engagement to avoid the significant risks of getting it wrong. If in doubt, get advice.
In sum, managing casual employees and their payroll can be complicated as well as time-consuming. Talk to ADP to learn how they support over 6,000 clients in Australia and New Zealand to manage their dynamic workforce.