Understanding The Latest Changes To Casual Employment

Starting 26 August 2024, Australia’s employment legislation will introduce major changes to the classification and treatment of casual employees. Here’s a concise summary of the updates and their potential impact on your business:

What Defines a Casual Employee?

Under the new regulations, a casual employee must:

• Have an Absence of Firm Advance Commitment: There should be no guarantee of ongoing, regular hours.
• Receive Casual Loading: They should be paid a casual loading or a specific casual rate as per their contract or Fair Work instruments (such as an Award).

Casual employees retain their employment status as Casual until a "specified event" triggers a change such as a conversion by order of the Fair Work Commission, or a conversion request from the employee to convert employment to full-time or part-time employment. Any transition to permanent status will only occur from the point of the event, not retrospectively.

To further verify that an employee is classified as casual, employers can itemise the casual loading on payslips, clearly indicating the amount paid for each employment engagement.

For example, if the employees’ casual hourly rate is $35 per hour, the payslip would detail:
Base rate per ordinary hour = $28
Casual Loading per ordinary hour = $7

Firm Advance Commitment

Whether there is a ‘firm advance commitment’ to continuing and indefinite work for the casual employees, this needs to be assessed on the real substance, practical reality, and true nature of the employment relationship, as well as other factors. Let’s break these down:

• Real Substance: The actual job demands beyond the formal description.
• Practical Reality: How the role functions in practice, including any unpredictable scheduling.
• True Nature: Whether the job is long-term or project-based.

Other factors that must be considered include:

• whether the employer can offer or not offer work,
• whether the employee can accept or reject work, and
• whether it is likely future work will be available to the employer’s business.

Additionally, employers will need to identify whether there are permanent employees performing the same kind of work and whether the employee has a regular pattern of work.

Casual Conversion Pathway

Employees can request to convert to permanent (full-time or part-time) status if they:

• Have Been Employed for at Least 6 months: Depending on whether they work for a small or larger business (12 months for small business employers).
• No Longer Meet the Casual Definition: They feel their role has evolved beyond casual employment.

However, they cannot request conversion if:

• There’s an Ongoing Dispute: About casual conversion.
• A Previous Request Was Refused: Or a dispute was resolved in the past 6 months.

Employer’s Response

Upon receiving a conversion request, employers must:

1. Consult with the Employee: Discuss the implications of changing employment status – 25% casual loading is removed, leave entitlements accrue, notice of termination/resignation applicable etc.
2. Respond in Writing within 21 Days: Either accept or refuse the request, providing specific details.

Grounds for Refusal

Employers can refuse a request if:

• Employee Still Fits Casual Definition: The role still meets casual criteria.
• Operational Grounds: There would be significant impacts on the operation and organisation of the employer’s business.
• Legal Requirements: Accepting the request would breach legal recruitment or selection processes and/or a change to the employee’s conditions would contradict requirements under an industrial instrument such as a Modern Award.

Risks of Misclassifying a Casual Employee

Despite safeguards under the new legislation, a casual employee may be able to commence a small claims dispute about whether they were a casual employee when they commenced employment (i.e. never met the definition of a casual employee). If a claim has been submitted, an order may declare the casual was a part-time of full-time employee from when they started work.

If a declaration backdates the employee’s status, an employer will be required to backpay (or otherwise recognise) the entitlements of a permanent employee that the employee did not receive as a casual, such as annual leave, personal/carer’s leave, public holidays etc. An employer may ‘offset’ the amount deemed owing if the employee is successful with any casual loading that was paid to the employee, this would be detailed in the casual employment contract. Penalties may also be imposed for failure to pay or recognise NES or entitlements required under an industrial instrument such as a Modern Award.

Casual Employment Information Statement:

Employers must provide the Casual Employment Information Statement (CEIS) to new casual employees before or as soon as possible after their start date. Additionally, it must be given to all casual employees at non-small businesses (15 or more employees in total) after 6 months, 12 months, and then every subsequent 12-month period.

For casual employees at small businesses (less than 15 employees), the CEIS should be provided as soon as possible after 12 months of employment. This update ensures ongoing transparency regarding employment conditions for casual staff.

Transitional Provisions:

Existing casual employees as of July 1, 2024, will remain classified as casual unless converted to permanent status. Service before this date won't count for new conversion eligibility, and misclassification risks could lead to disputes and penalties.

The recent changes to casual employment legislation bring significant implications for small and large businesses. MPAQ members must stay informed and adjust their practices to comply with these new regulations.

To ensure your business remains compliant and well-prepared for these changes, contact the MPAQ Advisory team on 07 3273 0800 or email advice@mpaq.com.au.

Article written by Citation HR