Hiring your first employee — or your tenth — forces a decision that shapes nearly every other aspect of the employment relationship: what type of engagement will you use? The choice affects pay rates, leave entitlements, how the relationship can end, and the exposure you carry if things go wrong. Get it right at the start and your contracts, payroll, and compliance obligations all align. Get it wrong and you may be paying back-entitlements for years, or discovering that a contract you thought would end cleanly actually has to run on.
Australia's framework under the Fair Work Act 2009 (Cth) recognises three core employment types: casual, permanent (full-time or part-time), and fixed-term. Each is governed by a specific set of rules under the National Employment Standards (NES) and any applicable modern award or enterprise agreement. The NES sets the floor — awards and agreements can add to it, but cannot take away from it. This article walks through the factors that should genuinely move your decision, where each arrangement typically fits, and where you should get legal advice before committing.
What drives the choice of employment type
How predictable is the work?
The most important question is whether you can predict, at the time of engagement, what hours the employee will work and how long the role will last.
Permanent employment — whether full-time (38 ordinary hours per week) or part-time (fewer than 38) — suits roles where work is ongoing and the schedule is reasonably foreseeable. The employee has a firm advance commitment to ongoing work, and the employer has a corresponding obligation to provide it.
Casual engagement, by contrast, is legally defined by the absence of that advance commitment. Under the definition introduced on 26 August 2024, a person is a casual employee if, at the time of engagement, the employment relationship has no firm advance commitment to ongoing work — assessed by looking at the real substance and practical reality of the relationship, not just the label on the contract. A regular pattern of shifts alone does not convert a casual arrangement into a permanent one, but the full picture of how the relationship operates does matter.
Fixed-term arrangements sit between these poles: the role has a definite start and end date, and both parties agree to maintain the arrangement for the full specified period.
What will the ongoing cost look like?
Casual employees do not accrue paid leave entitlements — no annual leave, no personal/carer's leave, no paid public holidays. In exchange, they receive a casual loading. The standard loading under the national minimum wage is 25%, and most modern awards prescribe the same rate. That loading can make casual payroll more expensive per hour than permanent employment, particularly for roles that become regular.
Permanent employees accrue:
- 4 weeks of paid annual leave per year of service (5 weeks for certain shift workers)
- 10 days of paid personal/carer's leave per year (pro rata for part-time employees)
- Additional NES entitlements including compassionate leave, community service leave, and long service leave under applicable state or territory law
Fixed-term employees engaged on a full-time or part-time basis receive the same NES leave entitlements as permanent employees. They also attract the same award conditions. The cost difference between a fixed-term and a permanent hire of the same hours is therefore minimal — the distinction lies in how the relationship ends, not in what it costs while it runs.
How long do you need the role to exist?
If a role is indefinite, permanent employment is the honest and legally sound choice. If the role is genuinely temporary — covering parental leave, completing a defined project, filling a seasonal peak — a time-limited arrangement can be appropriate.
For roles lasting beyond a few months, fixed-term contracts now come with significant constraints. Rules that took effect on 6 December 2023 prohibit fixed-term contracts that:
- run for more than two years (including any extensions or renewals), or
- are renewed more than once for the same or a substantially similar role
If a fixed-term contract breaches these limitations, the end date ceases to operate and the contract continues on an ongoing basis. Employers must also provide a Fixed Term Contract Information Statement to each employee when a new fixed-term contract is entered into.
The practical implication: if you need someone for three or four years, a fixed-term contract is no longer the right vehicle. You need a permanent engagement.
How much flexibility do you need at exit?
This is where the arrangements diverge most sharply.
Casual employees can generally have their engagement ended without formal notice, provided the contract confirms there is no guarantee of ongoing work. However, with no notice obligation comes no buffer — the relationship ends quickly in both directions.
Permanent employees are entitled to minimum notice of termination under the NES, scaling with length of service. They also have access to unfair dismissal protections once they have completed the minimum employment period: six months for employees of businesses with 15 or more employees, or 12 months for employees of small businesses (fewer than 15 employees). Ending a permanent engagement requires a defensible process, not just a conversation.
Fixed-term employees sit in a different position. If the contract expires at its end date, no notice is required and — provided the limitations have been complied with — the employee does not have access to unfair dismissal on the basis that the role ended. However, if you terminate a fixed-term employee before the end date without a contractual right to do so, you may be liable to pay the employee for the remainder of the term.
What is the real nature of the ongoing relationship?
Two risks arise from mismatching the label to the reality.
First, casual employees who work regular and systematic hours over time may now exercise the employee choice pathway introduced on 26 August 2024. Under this pathway, a casual employee who has been employed for at least six months (12 months in a small business) and who reasonably believes they no longer meet the definition of a casual employee can give written notice requesting conversion to permanent employment. Employers can only refuse on limited grounds. Refusing conversion does not end the right; it opens a dispute pathway.
Second, a string of courts and the Fair Work Commission have found that workers engaged as casuals but given regular, guaranteed shifts were not, in substance, casual employees. Back-payment orders have followed. Employers who review their casual workforce only when challenged — rather than regularly and proactively — face the largest exposure.
Where each arrangement typically fits
The right structure tends to track the underlying business need:
| Arrangement | Works well when… | Watch out for… |
|---|---|---|
| Permanent full-time | Role is ongoing, hours are predictable, you want stability and motivated staff | Exit process complexity; notice and unfair dismissal exposure |
| Permanent part-time | Same as above, but fewer than 38 hours per week; suits roles that don't need full-time coverage | Entitlements are pro rata, not avoided; still attracts NES obligations |
| Casual | Unpredictable demand, genuine peaks and troughs, or very short-term labour gaps | 25% loading increases hourly cost; casual definition must reflect reality; employee choice pathway |
| Fixed-term | Defined project, genuine temporary cover (parental leave, seasonal), role with a clear horizon | Two-year cap on term; penalty for early exit without contractual right; must give Fixed Term Contract Information Statement |
The arrangement that employers most often regret using in the wrong context is casual employment applied to workers who are, from week one, working the same days and shifts. The loading does not offset the legal exposure when the relationship is reclassified. Similarly, employers who reach for fixed-term contracts to avoid ongoing obligations — rather than because the role is genuinely temporary — often find that the two-year cap or a breach of the limitation rules leaves them with a de facto permanent employee and none of the documentation to match.
How Artificer Legal can help you choose and structure the right engagement
Choosing an employment type is a legal decision with payroll, compliance, and risk-management consequences. The way the contract is drafted will either protect the arrangement or undermine it. A contract that labels someone a casual but guarantees them set hours each week, or a fixed-term contract that allows either party to exit on notice, can unravel the protections the arrangement was supposed to provide. Artificer Legal's employment team can help you:
- assess the nature of the role and identify which engagement type genuinely fits the operational reality
- draft employment contracts that correctly reflect the arrangement and comply with the relevant modern award or enterprise agreement
- review your existing casual workforce and flag where conversion risk is accumulating under the employee choice pathway
- advise on the fixed-term contract limitations and whether any statutory exceptions apply to your situation
- prepare for and respond to unfair dismissal applications, general protections claims, and employee choice notices
We work with Australian small and medium-sized businesses, so our advice is grounded in the practical constraints of running a business — not just the technical requirements of the legislation. We can also help you build out the broader employment documentation that flows from the engagement type, including position descriptions, policies, and workplace information statements required by law.
Getting the structure right from the start
The employment type you choose at the moment of hire sets the parameters for everything that follows: how you pay, what you owe, and how the relationship can end. The single factor that most reliably decides the question is whether you can honestly say, at the time of engagement, that the role has no firm advance commitment to ongoing work. If you cannot say that — if the person is going to be there every Tuesday and Thursday regardless of operational demand — then casual employment is the wrong structure, regardless of what the contract says.
The key points to keep in mind:
- Casual employees are defined by the absence of a firm advance commitment to ongoing work — a regular roster does not automatically preserve casual status under the rules in force since August 2024
- The 25% casual loading compensates for the absence of paid leave entitlements, but does not insulate you from reclassification if the arrangement does not reflect the definition
- Permanent employees attract NES leave entitlements and notice obligations, and access unfair dismissal after the minimum employment period
- Fixed-term contracts are capped at two years (including extensions and renewals for the same role) under rules that commenced December 2023
- Fixed-term employees on full-time or part-time hours receive the same NES entitlements as permanent employees during the term
- Early termination of a fixed-term contract before the end date — without a contractual right to do so — can expose you to liability for the balance of the term