Employing a Casual Employee: What are their entitlements?
Congratulations, you’ve made the decision that it's time to employ a casual employee. While this can be an exciting period of growth for your business, and a time when you can look to offload some tasks on your to-do list, it can also be a confusing time getting your head around the legal ins and outs of how you can go about employing a casual employee the right way.
The rules governing this type of employment have changed recently, and it can make the process a complicated time for both employer and employee. That’s why it’s important to get as much information as possible before making that decision.
Employment templates to use when hiring can be found at the links below:
In this article we take a look at what a casual employee is, what their entitlements are and some other often-asked questions we get asked about casual employees. We also cover the situation where a casual employee is not actually considered a casual and what this means for your business.
What defines a Casual Employee?
A casual employee is a person who accepts an offer of employment knowing that there is no firm commitment to ongoing work with an agreed and consistent pattern of work.
For example, if someone is employed as a casual employee, their roster can change each week to suit their employer’s needs. Additionally, if the employee can refuse or swap shifts with others, that could mean they are a casual employee.
Under the Fair Work Act, a person is defined as a casual employee if:
- They are offered a job and the offer does not include a firm advance commitment that the work will continue indefinitely with an agreed pattern of work
- They accept the offer knowing that there is no firm advance commitment and become an employee.
Firm advance commitment is a commitment to an agreed pattern of work. It can sometimes be tricky in determining whether an employer’s offer includes a firm advance commitment or not. Consider the following four factors when determining this:
Whether the employer can choose to offer the employee work and it’s the employee’s choice to work or not
Whether the employee will be offered work when the business needs them to work
If the employment is described as casual
If the employee is paid a casual loading (a higher pay rate for being a casual employee), or a specific pay rate for casual employees
For casual employees, each time they have a shift or come into work, they are entering into a new employment agreement that’s regulated by the same contract. In summary, a casual employee is an employee who is only guaranteed work when it is needed and with no firm advance commitment.
When is a Casual Employee no longer a Casual Employee?
Once employed on a casual basis, an employee will continue to be a casual employee until they either become a permanent employee, or cease being employed by their employer.
A casual employee can become a permanent employee through one of two pathways:
1. through casual conversion; and
2. when they accept an offer of full-time or part-time employment.
Under the Fair Work Act, casual employees have the right to be made permanent after a time if they are found to be working as a permanent employee, but being paid casual employee rates. This is known as casual conversion. When an employee converts, they will usually be paid less, but they will be entitled to annual and sick leave.
As an employer it’s important that you document when and if you offer your employee casual conversion or not, and if not, you should be documenting why you don’t believe it’s appropriate.
One element that will help determine whether a casual employee is in fact a permanent employee is the predictability of the employee's shifts.
Consider this:
Do they have the same shifts every day?
Do they have a weekly routine?
Has this been predictable over the period of six months or more?
A recent matter of this nature was heard by the High Court and consequently overturned a decision made by the Federal Court in the case WorkPac v Rossato.
Mr Rossato was employed by WorkPac between 2014 and 2018 as a labour-hire mining truck driver. During this time, Mr Rossato signed six separate consecutive assignment contracts which all described his employment type as a casual employee, and he received a 25% casual loading rate.
Mr Rossato claimed he should receive paid annual leave as he had been treated as a permanent employee by WorkPac through 6 consecutive assignments over the period of four years.
The matter went through various courts in August 2021, the High Court delivered a definitive answer, holding that Mr Rossato was contracted as a casual employee. In coming to this decision, the High Court upheld the test around no firm advanced commitment and noted that the written contract was important in reaching this decision, because it indicated that termination and variation of the agreement could occur with only one hour’s notice.
WorkPac v Rossato in relation to its impact on casual work arrangements. It highlights the importance of documenting and having a casual employment contract in place. Many people have casual employees and do not have a contract drawn up, but in our view it is essential to have a contract because that is what the Court will look at if there is a dispute, and if you do not have one, you could be in trouble.
If an employee is found to be permanent rather than casual, then the employer may have to back pay entitlements such as long service leave, annual leave and sick leave.
In addition to having a contract, an employer is required to provide their casual employees with the Casual Employment Information Statement.
Common questions I’m asked about Employing a Casual Employee
Do I need to pay super for casual employees?
Yes, you absolutely need to pay superannuation at the statutory rate, which has increased up to 10%.
It’s important to keep on top of changes in statutory rate. In previous years It was 9%, and then it increased to 9.5%. The statutory rate is now at 10% and is expected to be gradually increasing in coming years. Not paying your casual employees correctly can result in penalties from the government.
Can casual employees take time off?
Yes, casual employees are entitled to unpaid carers leave, five days unpaid family and domestic violence leave. What is important to know is that as casual employees, they are able to say, within practical terms, that they cannot come in for a shift.
How to sack a casual employee?
It is a wise idea to have a contract in place, particularly after the Rossato v WorkPac case. When a written contract is in place, the contract applies and there’s no ambiguity.
With casual employees, we draft contracts saying that each time they have a shift, it is a new contract that is regulated by the same contract. You can then also give them notice if you need to terminate their employment for whatever reason.
Because there is no guarantee of regular or ongoing work as a casual, it does not matter what a casual employee does, as you can let them go at any point.
Casual employment therefore is not a secure form of employment. They are usually paid more than permanent part-time, as they are not entitled to any redundancy payout.
What should I include in my casual employee agreement?
A Casual Employee Agreement should always be confidential, it should include information such as the type of employment and position title and the relevant clauses to govern the relationship.
The contract terms are key in determining if a position is casual. As an employer, it’s important to be very clear that there is no guarantee of ongoing work and that there is no firm advance commitment - that every time they work a shift, they are effectively engaging in a separate contract, which ceases at the end of that engagement. The right to casual conversion should also be mentioned and we set this out in more detail in the paragraph below.
Restraint of Trade or Conflict of Interest with Casuals
The conflict of interest and restraints of trade are a little different in a casual employee’s contract to a permanent employee, because they might hold other roles.
By insisting on this, you could be stopping them from working for a competitor when they might need to find a permanent job. We put a clause in our contracts about conversion to permanent employment where if it’s found that their employee is a regular and systematic casual employee, and therefore entitled under the Fair Work Act and the Fair Work Amendment, Casual Loading Offset Regulations. That is, at any time after the start date, the employee agrees that all casual leave loading paid to them under this contract will be offset by the employer, in calculating any entitlements under the Acts.
Employing a casual employee can appear confusing and complicated, but it can also be a beneficial business decision. Although a casual employee is usually paid a higher rate than a permanent part-time employee, you as the employer are not obligated to provide ongoing job security, entitlements or redundancy pay.
The key to protecting yourself as an employer and ensuring you do right by your employee comes down to having a very clear, thorough and concise contract agreement in place to clearly outline your rights as an employer and their rights as an employee.
Related: The common mistakes business owners make when they hire contractors (and what to do instead!)
Work-from-Home Agreements for Your Employees
Keeping it confidential: When to use a non-disclosure agreement
As you now know, there is a lot to consider when hiring a casual employee. If you would like to ensure you are protected when it comes to employing casuals, you can either take a look at our Casual Employee Agreement Template or to discuss your needs more specifically, book a time to speak with one of our team here.