New casual conversion rules – Is it time to review your workforce?

The concept of casual conversion first entered the limelight when the Modern Awards were amended to include the right to request casual conversion in 2018. Fast forward to 2021 when businesses thought they had that concept under control, the Fair Work Act 2009 (Cth) (“Act”) was amended to alter the casual conversion provisions. Whilst providing more job security for regular and systematic casual employees, it may present resourcing and workforce planning challenges for businesses who rely on a flexible and casual workforce. 

Under the new provisions, which are effective from 27 March 2021, the Act now provides: 

  • A clearer definition of a ‘casual’ employee; 
  • Confirmation of the ability to set off casual loading against entitlements the employee would otherwise have received if they were later deemed a permanent employee to prevent ‘double-dipping’; and
  • That employers (other than a small business employer) must offer permanent employment to its eligible casual employees. 

Who is a casual employee? 

A casual employee is now someone who has been: 

  • Offered employment without a ‘firm advanced commitment to continuing and indefinite work’; 
  • Has accepted the offer on that basis; and 
  • Is an employee as a result of that acceptance. 

There are 4 questions that an employer must consider when determining whether a person is a casual employee. These are: 

  • Whether the employer can elect to offer work and whether the person can freely elect to accept or reject work; 
  • Whether the person will work as required according to the needs of the employer;
  • Whether the employment is described as ‘casual employment’; and 
  • Whether the person will be entitled to a casual loading or a specific rate of pay for casual employees under the terms of the offer or a fair work instrument. 

Regardless of how the employment relationship evolves, the employee is a casual employee on the basis of the offer of employment and acceptance of that offer, rather than the subsequent conduct of either party.  

Are my existing casual employees affected? 

It is important to reassess the employment relationship with your current casual workforce to ensure the 4 considerations aforementioned are met and that the initial offer and acceptance of employment meets the new statutory definition of a ‘casual employee’.

How does this affect my business?  

If you are an employer, other than a small business employer, you will now be required to proactively offer permanent employment to eligible casual employees, unless you have reasonable grounds not to do so. If you determine they are not eligible for conversion, you must still notify them in writing. 

The effect of the new provisions to a small business employer is smaller as you do not need to offer permanent employment. Instead, your eligible casual employees have a right to request permanent employment (which was the case prior to the changes). 

How do I know if my casual employee is eligible for conversion?

A casual employee becomes eligible for conversion once they have been employed by the organisation for 12 months, worked a regular pattern of hours for at least the last 6 months on an ongoing basis and could continue working those hours as a permanent employee without significant changes. 

Next steps

It is a worthwhile time to review your workforce as a whole to reassess your needs, whether reliance on casual employees is viable, whether the organisation is able to offer permanent employment and the effects this will have on the bottom line.  

You will also need to ensure the newly released Casual Employment Information Statement (CEIS) from the Fair Work Ombudsman is provided to all new employees upon commencement (along with the Fair Work Information Statement) and to all existing employees either immediately (small business employers) or as soon as possible after 27 September 2021 (all other employers). 

Most importantly, employers should commence assessing their existing casual workforce to determine who is an eligible casual employee as offers to permanent employment need to be made before 27 September 2021 to ensure compliance. 

Have further questions?

If you have any further questions or assistance in reviewing your workforce and ensuring compliance, please do not hesitate to get in touch with enrichHR.

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