What Is a Fixed-Term Contract? (Definition and FAQs)

Updated 2 January 2023

There are several different types of contracts for employment options you may have during your career. The type of contract you have may depend on your employment and how long you have been in the business. Companies often use fixed-term contracts for temporary employees, so it might be helpful for you to learn more about them if you're taking on a casual or temporary role. In this article, we answer the question, 'what is a fixed-term contract?' and discuss what industries and situations you may find them in and their potential benefits.

What is a fixed-term contract?

A fixed-term contract is an agreement to work for a certain period of time. These contracts are common for seasonal employees or offices that require certain staff members for a short time. The exact length of a fixed-term contract can vary, from a few weeks for fruit pickers or seasonal workers to 12 months or more for those covering maternity leave.

For example, a hotel in the Kimberley region of Western Australia may employ you. Because this area of the country is very seasonal, with parts impassable in the wet season, your contract may only run for the dry season and end in October, when the wet season begins.

What is a maximum-term contract?

A maximum-term contract is similar to a fixed-term contract in that it is temporary. However, the end date is not definite, and either party could bring it forward. Instead, it notes the date when the professional can complete the work and guarantees that it does not go on any further than this.

Related: What Is a Contract Employee?

What are the rights of fixed-term employees?

If you're a fixed-term employee, you typically have the same rights as permanent employees. Employers typically allow you a certain amount of holiday and have the same entitlements to allowances and sick days. Unlike maximum-term contracts, the employer cannot terminate the contract without a reasonable cause. Employment can end for specific reasons, but only if deemed suitable under the Fair Work Act. If a professional on a fixed-term contract feel that their employer has dismissed them for no just reason, they can dispute this under the Act.

This contract also applies to employees. They may not terminate the contract without a reasonable cause. The exact terms for leaving a contract may vary depending on the company, but they may work the entire term or give sufficient notice before they leave.

Do fixed-term employees receive full training?

Fixed-term employees may receive some initial training to enable them to do their job effectively. They may not receive the same level of continuous training as those on permanent contracts. This is because fixed-term employees only provide service for a specified period, meaning they may not need to know every aspect of the business.

Even without full training, working on a fixed-term basis can give you excellent vocational experience. Similarly, you may not have appraisals or evaluations as a fixed-term employee because these are typically used to discuss a candidate's future with the company. You may also not have access to promotions, but you can apply for more senior positions once your fixed-term contract ends.

What is the difference between fixed-term and casual work?

While fixed-term professionals have the same rights as those on a permanent contract, casual workers do not. Causal workers do not usually have a fixed amount of hours and may work on a different basis each week. Their contract may not specify any hours, and they do not typically have paid holidays. However, they often can refuse shifts or block out time when they cannot work.

Additionally, casual workers usually do not commit to working for a specific period, whereas fixed-term workers have a definitive end date. Casual workers can also leave the job at short notice and without a just reason, whereas fixed-term employees cannot.

What industries and jobs have fixed-term contracts?

There are a few industries that might require workers on fixed-term contracts. Here are some examples:

Seasonal

Seasonal jobs such as dressing up as a seasonal character or working at a festive market only open up at specific times of the year. Some shops may also hire temporary staff over peak periods as it is typically busier than other seasons. These staff may be on a fixed-term contract with the possibility of signing a new permanent contract at the end of their placement.

Tourism industry

Tourism jobs are often seasonal, particularly in areas of Australia with a definitive wet and dry season, such as northern Western Australia and the Northern Territory. Other examples of seasonal jobs in the tourism industry are in beach destinations in Victoria, which are not as popular in the winter. Similarly, ski resorts in New South Wales and Victoria are only operational in the winter.

Farming industry

Farms use certain professionals at different times of the year, so they may utilise fixed-term or maximum-term contracts to ensure that they only pay for the required staff. They may hire team members for a set period when their fruit or vegetables are in season.

Agricultural organisations may also use maximum-term contracts. For example, farmers could hire professionals to pick strawberries during peak seasons. However, the duration of the strawberry season may be unpredictable. In this case, farming companies could set a maximum-term contract that ends in July. They have the option to terminate the agreement earlier if necessary.

In-office jobs

Office-based professionals may also employ fixed-term contracts. For example, they may advertise for a temporary staff member when another is on maternity leave, secondment or extended service leave. Companies may hire extra staff when they're particularly busy, such as on projects requiring extra help.

What are the benefits of fixed-term contracts?

Certain benefits may make fixed-term contracts appealing to certain people, including the following:

Less commitment is required

Some candidates may not want a job with a permanent contract. For example, students may wish only to find summer work while they're on their university holidays. A fixed-term contract at a summer holiday resort would be perfect.

Other candidates may be saving to travel or for university, and they may benefit from an office-based role covering maternity leave. They may take this role knowing that it has a definitive end.

Quicker hiring process

Recruiters might try to fill these fixed-term jobs straight away, making the hiring process much quicker. The interviewing process is faster, and the job requirements are often less advanced. Fixed-term contracts could be ideal for those who want to find a job quickly.

Gain experience

Fixed-term contracts do not have the same requirements as permanent jobs, meaning they can help those with little workplace experience. For example, if you wish to work in the marketing industry, you may find a fixed-term position to help the marketing team with a specific project, and they could be more likely to hire you with little experience. Once you have completed this fixed-term contract, you might be more attractive to other potential employers as you now have work experience.

Build connections

While fixed-term contracts are typically only for the allotted time, working in one can help you gain valuable connections. You may find that the company you work with has an opening for a permanent position a few weeks after your fixed-term contract ends, and they may contact you first to ask if you're interested. Alternatively, if you're working on a fixed-term basis for a seasonal company and impress them, they may invite you to work for them again the following year. You can also ask your employer if they know anyone in the industry who is hiring.

More security than casual work

While fixed-term contracts only run for a set amount of time, they offer more security than casual jobs. Under the Fair Work Act, employees cannot terminate fixed-term contracts before their end date for no just reason. In contrast to casual work, the employee can stop offering work at any point.

Can fixed-term contracts turn into permanent contracts?

Fixed-term contracts are typically for temporary roles. However, companies may be more likely to offer future permanent positions to past employees who have impressed them on fixed-term contracts.

For example, if you cover for a professional while on maternity leave, you might leave the company when they return. If a colleague in a similar role departs the company, the organisation may consider you on a permanent contract before advertising the job elsewhere.

This article is based on information available at the time of writing, which may change at any time. Indeed does not guarantee that this information is always up-to-date. Please seek out a local resource for the latest on this topic.

What Is a Fixed-Term Contract? (Definition and FAQs)