With the introduction of new Fair Work Regulations from 1 November 2024, Not for Profit (NFP) entities that are registered charities will have more flexibility to enter into fixed term contracts.

The previous exception

The basic requirement for fixed or maximum term contracts is that they must not run for more than 2 years. There are some exceptions, including where a contract relates to the performance of work that is funded by government. However, the utility of this exception has been limited by the requirement that

1. the funding be payable for more than 2 years, and

2. it has no reasonable prospects of being renewed.

In light of the uncertain nature of government funding, it has been difficult in practice for NFP employers to confirm that there were no reasonable prospects of funding renewal.

The new exception

Following consultation with the NFP sector, the government has amended the Fair Work Regulations to expand the type of contracts which will be exempt from the fixed term contract limitations. In summary, the amended exception means that NFPs that are charities can align fixed term contracts with the funding period for a program or project provided that

1. the funding period is 5 years or less, and

2. the employee has not been (or will not be) employed for more than 7 years.

The following checklist summarises the types of contracts which will be exempt:

The medical and health workers to whom the exception applies and doesn’t apply

The funding exception has also been expanded to include medical or health research employees, provided that their work primarily involves research (including basic, clinical, pre-clinical and translational research).

The government funding exception does not apply to employees who work in public hospitals. These employees will only be exempt from fixed term contract limitations in relation to programs or projects that are funded by charities or testamentary gifts or contributions.

Conclusion

The new government funding exception will significantly improve the ability of NFPs to employ employees in a manner that reflects their funding realities and requirements. We anticipate that this improved flexibility will result in higher levels of employment in the sector while decreasing the administrative burden that has arisen in the last year as NFPs have dealt with the complexities of applying the 2 year fixed term contract limitation.