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Can employees convert from casual to permanent contracts 

Whether it’s for greater stability or additional paid leave benefits, sometimes casual employees may request to convert to a permanent position.

This conversion from casual to permanent means a transition from an existing casual contract to permanent part-time or full-time employment. Although this was previously a grey area for employers, new rulings now provide greater clarity on the terms of conversion and the process. 

From 1 October 2018, new rulings by the Fair Work Commission (FWC) came into effect for casual employees. In the updated Modern Awards, regular casual employees may be eligible to request a change from casual to a permanent full-time or permanent part-time position.

So what does the decision mean for employers? Here’s what you need to know.

 

What is “regular” casual employment?

According to the Fair Work Ombudsman (FWO), casual employees do not have a commitment from their employer about their employment duration or hours. Casual employees do not have regular hours and do not get paid annual or sick leave. To compensate, they receive a higher pay rate, otherwise known as ‘casual loading’. 

The recent FWC ruling only applies to long-term regular casual employees. These employees have worked a pattern of regular hours over the past 12 months, and expect to continue performing these tasks under permanent employment.


 

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Fair Work Commission changes regarding casual employment rights

New rules for casual workers started from 1 October 2018, following FWC rulings from 2017 and 2018. These changes mean:

  • all modern awards now include a casual conversion clause to allow regular casual employees to convert to permanent employment

  • employers can’t engage casual employees for shifts shorter than 2 hours

  • some casual employees may receive additional entitlements to overtime in some modern awards. This includes Horticulture, Hospitality, Registered and Licensed Clubs and Restaurants.

Under these new rulings, casual employees working over 38 hours per week on average in the past 12 months can request to go from casual to permanent full-time. Those working less than 38 hours per week can request to transition from casual to permanent part-time. 

Converting employees from casual to permanent employment

According to the FWC, casual workers who want to become permanent employees need to put a request in writing to their employer. If it’s accepted, the confirmation and details of the conversion must be documented in writing.

Employers can also refuse the request if there are “reasonable grounds for refusal”. Reasonable grounds could be because the shift would require a significant adjustment in working hours. A casual to permanent request could also be refused if the position is likely to change in the next 12 months. Any refusal should be based on factual evidence or reasonably foreseeable events. 

Casual employees are not obligated to convert to permanent full-time or permanent part-time. 

The impact of casual to permanent employment legislation on employers

The FWC rulings are a positive change for employers, according to Joe Murphy, Managing Director National Workplace at Australian Business Lawyers & Advisors. The rulings provide greater clarity for employers who may have previously been unsure of how to handle requests for permanent employment from casuals.

"There's definitely more upsides than downsides to the decision," says Murphy. "While businesses need to issue a notice of conversion within the first 12 months, we know that for many employers who have these long term casuals, it's usually an arrangement of mutual convenience. The employee gets their casual loading and the employer doesn't have to keep accrued annual leave and sick leave on its ledger."

"However we have seen the situation, when a long term casual employee turns around and says 'I should have always been a permanent employee, I want my sick leave and annual leave'. This decision is going to manage some of that risk to employers," he adds. 

What's the impact for casual employees?

For employees looking to go from casual to permanent employment, the FWC changes provide a range of benefits. Casual workers' rights don't include paid leave. By becoming a permanent team member, employees have access to entitlements including paid sick and annual leave. They are also guaranteed a fixed number of hours in a week, and more stability and security in their role. 

While there will be some employees switching from casual to permanent employment, the impact likely won't be as significant as employers may believe. This is largely due to pay. When transitioning from casual to permanent employment, employees will likely see a reduction in their casual loading rate. Casual employees therefore need to decide whether to stay with their current arrangement or sacrifice their pay rate and long term casual employee rights.

"There's no doubt there will be an uptake, but I think the uptake is going to be limited. Faced with a 20% pay cut, most casuals are just not going to be attracted to the offer of full-time or part-time employment," says Murphy. 

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