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Underpayment of employees is a hot topic at the moment. George Calombaris, Michael Hill and the Shangri-La Hotel have all been investigated by the FairWork Ombudsman for underpaying their staff. To ensure you are paying your staff correctly, those that you employed as casuals must indeed be casuals. This article will explain what a casual employee is and the entitlements that you must provide to casual employees.

What Is the Definition of Casual Employee?

The definition of casual employees is evolving and has received a lot of attention in recent years. Currently, you must pay casual employees a 25% loading on top of their rate to be casual. You must stipulate this in their employment contract

If your employee’s work schedule is regular and systematic, it risks being deemed permanent, rather than casual. This opens the door for your employee to seek back-pay for unpaid permanent employment entitlements. So, it essential that you review and confirm that your casuals are, in fact, casual. 

Typically casual employees have similar working arrangements. These include that they: 

  • have no guaranteed hours of work;
  • work irregular hours on an ad-hoc basis;
  • do not receive sick or annual leave; and
  • can end employment without notice.

Casual Loading

You must pay casual employees 25 % casual loading on top of their hourly rate. 

For example, if an employee’s ordinary wage is $20 an hour, they should actually receive $25 an hour with casual loading.

Casual loading aims to compensate for entitlements like annual leave and sick leave that permanent employees receive. It is essential that you expressly outline this in the employee’s casual employment agreement. 

For example, you can specify their base hourly rate and then that they will receive a 25% casual loading on top of that.

If a court deems that you really engaged a part-time employee as a casual employee, the casual loadings may be able to be set off against other permanent entitlements.

For example, if the casual loading added up to $20,000 over one year and the annual leave entitlements were $20,100, then the court could offset the two.

Casual Conversion Clause

Many casuals work on a regular and systematic basis, even though casual employment standards require them to work irregularly. This prompted the need for the casual conversion clause. A casual conversion clause allows casuals with 12 months service who are working regular casual shifts to request they convert to part-time or full-time employment. Employers can refuse the conversion request if they have consulted with the employee, and there are reasonable grounds for refusal. 

For example, if the employee has not been working consistently or regularly over the past 12 months, you may be able to refuse the request.

Employers must provide the employee with their reasons for refusal in writing and within 21 days of the request. If an employee disagrees with this decision, they can apply to the Fair Work Commission

Unfair Dismissal Claims

As casual employment terminates at the end of each shift, genuine casual employees are unable to bring unfair dismissal claims. This is because, essentially, the casual employee cannot be ‘dismissed’ as their employment is technically terminated at the end of each shift. However, if there is a risk that the employee could be considered actually to have permanent employment, you must take steps to ensure you are protected from a claim of unfair dismissal.

Key Takeaways

It is essential to ensure you are correctly characterising your casual employees. You should have a casual employment agreement that clearly outlines their engagement. This includes outlining they are casual and receive a casual loading. It is not enough just to rely on paying them the extra 25% casual loading and not be concerned about the practical aspect of how the employee is engaged. Taking steps now will ensure that you do not face any claims from FairWork. If you have any questions about ensuring that your casual employees are really casual, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.


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