As an employer, you should be aware that changes to the Fair Work Act (FWA) in 2021 have resulted in a more explicit definition of casual employees. Other than for small business employers, the changes impose new obligations on employers to offer casual workers conversion to permanency in certain situations. Hence, it is more important than ever to ask the question, “are my employees casuals?” in order to meet your legal obligations. This article will provide clear guidance on whether your employees are casual and what this means for your business.
Determining Whether Your Employees are Casuals
Casual employees as those workers who know that there is no firm advance commitment to ongoing work with an agreed pattern of work in accepting a job offer. While there is now a legal definition of ‘casual employees’, it is not always clear what factors to consider when determining whether a casual employment relationship exists.
You may find the table below helpful when determining the nature of your current employment relationships and when thinking about onboarding new employees on a casual basis.
| Indicators that your employment relationship is casual | Indicators that your employment relationship is permanent |
| You pay them hourly rates. | You pay their wages as a salary. |
| The employee works inconsistent hours. For example, they may work Monday to Friday, 9 am-5 pm one week, but only work on Tuesday, 12 pm-5 pm the following week. | They work consistent hours. |
| The employee works according to a roster system, and you can publish the roster with little notice (i.e. on a weekly basis or with a couple of days’ notice). | They do not work to a roster system. If they do, they know their exact days and hours well in advance. |
| You and the employee may not reasonably expect ongoing work availability. | You and the employee will reasonably expect ongoing work availability. |
| The employee does not require notice before the employee is absent. | The employee needs prior notice if they are going to be absent. |
| You have made it clear that the employee’s role is casual. | You have not expressed that the employee’s role is casual. |
| You do not have to pay the employee leave, such as annual and personal leave. You or the employee can terminate the employment relationship with little to no notice. | You must pay the employee leave, such as annual and personal leave. A minimum notice period is required for termination by either party. |
Casual Employee Entitlements
Permanent and casual employees have different entitlements. It is essential to keep these entitlements in mind when employing casuals to ensure you know the rights of both yourself and your casual employees.
| Employer Rights | Casual Employee Rights |
| You do not have to pay them annual or paid personal leave. | You may have to pay casual employees under a modern award or agreement an additional casual loading of 25%. This loading is on top of the minimum rate of pay.This means that if the minimum pay rate is $18.00 per hour, you may have to pay an additional loading of 25%, making the employee’s minimum pay rate $22.50 per hour. |
| You do not have to give them the same notice period as specified in the National Employment Standards (NES). | The employee can access two days of unpaid compassionate leave and unpaid carers’ leave per occasion. They also have access to ten days of paid family and domestic violence leave (in 12 months). |
| You can terminate the employee with one hour’s notice unless otherwise specified in their employment agreement or the relevant modern award. | They can request to become permanent employees after 12 months of regular and systematic work. We will discuss this further below. |
Casual Employee Leave Entitlements
Although long-term service can indicate a permanent employment relationship, some casual employees are long-term casuals who may work regularly and systematically. Suppose this is the case, and those employees have a reasonable expectation of continuing employment. In that case, they will be entitled to:
- unpaid parental leave of 12 months, provided you have employed them on a regular and systematic basis for at least 12 months; and
- an unfair dismissal claim once they have served the minimum employment period of 6 months unless you are a small business with fewer than 15 employees (in which case, the minimum employment period is 12 months).
Requests to Become Permanent Employees
Importantly, some casual employees under the National Employment Standards may have a right to request permanent employment. With recent changes to the law, you now have a positive obligation to offer ‘casual conversion’.
If your casual employee wishes to convert to permanent employment, casual employees must show that:
- you have employed them for a minimum of 12 months and 21 days; and
- over the last six months, they have worked a regular pattern of hours on an ongoing basis without significant change.
They must make any request for conversion in writing.
As their employer, you must offer casual conversion
- if you have employed them for 12 months and;
- they have worked a regular pattern of hours on an ongoing basis for at least the last six months; and
- they could continue working that regular pattern of hours as a permanent employee without significant changes.
You must make the offer in writing within 21 days of their 12-month anniversary unless there are reasonable grounds not to do so.
Implications for Employers
As an employer, you must take care when engaging employees on a casual basis. Otherwise, you may have to pay a penalty or face a legal dispute if you fail to:
- correctly classify an employee;
- pay them appropriately; or
- offer casual conversion.
These penalties may cost up to $66,600 for a corporation and $13,320 for an individual.
Furthermore, failure to correctly classify and pay an individual could result in the employee making underpayment claims against you. Ultimately, the Australian Taxation Office may also bring claims for failure to withhold the correct tax.
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Key Takeaways
As an employer, it is important to ask, “are my employees casuals?”. Casual employees have several entitlements that are not always clear. Given casual employees face job uncertainty and cannot access leave entitlements, it is imperative that you correctly classify and support them. Additionally, casual employees who have regularly worked for you over some time may also be able to take additional leave or request to change to permanent employment.
If you need additional advice on employee entitlements, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Yes. Under awards and agreements, you must pay casual employees a casual loading (a higher pay rate for being a casual employee) or a specific pay rate for being a casual employee instead of other entitlements. This is usually 25%.
No. However, a casual employee working for a small business employer can still request to convert to permanent employment at any time on or after their 12-month anniversary. You need to respond to this request in writing within 21 days.
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