By Dr Laura Sowden, Partner and Anna Ly, Senior Associate

Background

We have seen a number of charities and not-for-profit organisations employing workers on a fixed-term or maximum-term contracts because of the funding they receive from the government or from another charity or not-for-profit organisation.

From 6 December 2023, significant reforms to Australia’s workplace relations system came into effect, which included changes to the legislative requirements for both maximum-term and fixed-term employment contracts. These changes should be considered to ensure compliance and proper drafting of contracts.

A maximum-term contract is a type of fixed-term contract which is terminable by notice before the expiry of the term.

What do the changes in legislation mean?

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (the Act) amended the Fair Work Act 2009 (Cth) (FW Act). The provisions regarding fixed-term or maximum-term contracts came into effect on 6 December 2023.

It is now unlawful for an employer to enter into a fixed-term contract with a permanent employee:

• where the contract term exceeds two years; or
• where the contract allows for renewal that would see the entire term exceeding two years;
• where there is an option or right to extend or renew the contract more than once; or
• where there are consecutive contracts for the employee to perform the same or substantially similar work.[1]

What are the exceptions?

There are exceptions outlined in s 333F(1),[2] under which employers may use fixed-term contracts ongoing, including where:

• the role requires specialised skills to complete a distinct and identifiable task;
• the contract forms part of a training arrangement;
• the employer needs additional workers to do essential work during a peak demand period;
• the employer needs work performed during emergency circumstances or during a temporary absence of another employee;
• the employee earns over the high-income threshold [currently $183,100 from 1 July 2025];
• the work is of a kind funded in part or full by government or funded as prescribed by the regulations;[3]
• the employee is appointed under governance rules of a corporation or other association;
• the relevant modern award allows a fixed-term or maximum-term engagement;
• the contract is prescribed by the regulations.

The Fair Work Regulations 2009 (Cth) (FW Regulations) outline criteria that must be met for the limitations on fixed-term contracts not to apply.

On 30 October 2025, changes were made to the fixed-term provisions within the FW Regulations.

Currently, the criteria in subregulation 2.15(7)[4] are as follows:

Charity and not – for – profit sector employees[5]

(7) For the purposes of paragraph 333F(1)(i) of the Act, a contract entered into by a person and an employee is prescribed if:

(a) the person is, or enters into the contract on behalf of, a philanthropic entity[6] (the relevant entity); and

(aa) the total annual revenue of the relevant entity is less than $10,000,000; and

(b) the contract relates to a position for the performance of work that is funded in whole or in part by:

(i)  government funding provided by way of a grant or procurement, other than funding excluded by subregulation (8); or

(ii)  funding provided by a philanthropic entity (other than the relevant entity or an associated entity of the relevant entity); or

(iii)  funding provided as a testamentary gift or testamentary contribution to the relevant entity for a charitable purpose (within the meaning of the Charities Act 2013) of the relevant entity; and

(c) the work is to be performed for the purposes of a specific program or project to which the funding relates; and

(d) the period for which the program or project is to be conducted is, taking into account so much of that period (if any) as has already occurred, a period of not more than 5 years; and

(e) the identifiable period (see paragraph 333E(1)(b) of the Act) at the end of which the contract will terminate is substantially the same as the period, or the remainder of the period, for which the program or project is to be conducted; and

(f) if the employee is already, or has previously been, employed by the person–the employment of the employee for the identifiable period would not result in continuity or substantial continuity of an employment relationship between the person and the employee for a period of more than 7 years; and

(g) at the time the contract is entered into, the employee is not covered by either of the following modern awards:

(i) the Higher Education Industry—Academic Staff—Award 2020;

(ii) the Higher Education Industry—General Staff—Award 2020; and

(h) any arrangements for the provision of funding covered by paragraph (b) of this subregulation take effect on or after 1 November 2024; and

(i) the contract is entered into:

(i) on or after 1 November 2024; and

(ii) before 1 November 2026.

(7A) For the purposes of paragraph 2.15(7)(aa), if:

(a) the relevant entity is part of a reporting group (within the meaning of the Australian Charities and Not‑for‑profits Commission Act 2012); and

(b) the total annual revenue for the reporting group is $10,000,000 or more for the most recent financial year (for which financial statements are available) to end before the person entered into the contract with the employee;

the relevant entity’s total annual revenue is taken to be $10,000,000 or more, unless the relevant entity provides evidence to the contrary that would satisfy a reasonable person.

It is relevant to note that the criteria in subregulation 2.15(7) require satisfaction of all paragraphs (a) through to (i). It is quite onerous.

For example, if a contract is entered into outside the 1 November 2024 to 1 November 2026 window (reg 2.15(7)(i)) then based on the FW Regulations, the contract is not “prescribed by the regulations”, and therefore cannot operate as a fixed-term contract.

This is quite onerous for charities and not-for-profit organisations that receive funding from a “philanthropic entity” for the purpose of employing workers.

Employers should be mindful of such provisions in the FW Act and FW Regulations prior to engaging employees on a fixed-term or maximum-term contracts.

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[1] Fair Work Act 2009 (Cth) s 333E.

[2] Ibid s 333F.

[3] Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 Explanatory Memorandum [573]; In relation to the government funding, “the employer is reliant on government funding, or other funding of a kind specified in the FW Regulations, to directly finance the employee’s position either in whole or in part-the employer must receive the funding for more than two years, and there must not be any reasonable possibility that the funding will be renewed”.

[4] Subregulation 2.15(7) of the Fair Work Regulations 2009 (Cth) was introduced and commenced on 1 November 2024.

[5] Fair Work Regulations 2009 (Cth) subsection 2.15(7).

[6] “philanthropic entity” means an entity registered under the Australian Charities and Not – for – profits Commission Act 2012 as the type of entity mentioned in column 1 of item 1 of the table in subsection 25 – 5(5) of that Act.