Businesses rely on casual labourers to provide the support they require for peak periods or for project-based work or on a one-off basis. The absence of a statutory definition for casual work, has left the understanding of what is to the Fair Work Ombudsman who defines a casual employee as one who:

  • Has no guaranteed hours of work
  • Usually works irregular hours (but can work regular hours)
  • Doesn’t get paid sick leave
  • Can end employment without notice, unless notice is required by a registered agreement, award or employment contract

Over time, the compensation of casual workers through a 25% loading in lieu of leave and other NES entitlements to permanent employees, has provided an attractive business model for many small and medium businesses because there are no paid leave entitlements to carry into the next financial year for casuals. As a result, the rise in long term casuals has been the case.

For many casual workers, the casual alternative means a higher take home pay and the ability to have flexible hours of work. However, the gradual casualisation of the Australian workforce has become a cause for concern chief amongst which, are the lack of wage security, lack of ability to bargain for a higher wage and the inability to access leave are seen as factors having major societal implications if the trend continues.

Prior to the casual conversion decision by the full bench of the Fair Work Commission on 5 July 2017, only four of the 120 modern awards had a casual conversion clause. This decision will now see another 85 modern awards include the provision.

The model clause is clear on who can request the conversion and the grounds under which an employer can refuse the conversion. In short, anyone working consistent and systematic hours of work on a casual basis over a 6-12 months period (depending on the award) on a casual basis is eligible to request conversion to permanent employment. Although the final wording of the model clause is yet to be finalised, it would be prudent to ensure that as an employer, you are prepared and that your risk profile is updated.

This means employers and businesses will now need to:

  • Review your workforce planning and your current use of casual labour. If there is a significant impact on your business, you may wish to consider alternatives such as labour hire and other outsourcing models.
  • If you have casuals already working fairly regular hours over the last six months, you need to:
  • get an idea of how many will be transitioning to permanent employment
  • what the consequences will be if they did
  • do you have ‘reasonable grounds’ to refuse a casual employee’s conversion request?
  • Monitor the period of engagement of casuals and ensure they engagement letters contains information on the casual conversion clause.
  • Ensure decisions for casual conversions are made within the stipulated 21-day period from date of request.
  • If you have an Enterprise Agreement, this means unions will put pressure to enter this provision into the agreement.

Further reading: Landmark decision upholds casual to permanent conversion clause

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Please contact Lauren Morrison at lauren@lmhr.com.au or Mob: 0400 225 499 if you would like to learn more about how LM HR Consulting can assist your business with your HRM requirements.