Among the wide range of leave and other employee entitlements, only some apply to casual employment. Traditionally, casual employees have instead been paid a casual loading – usually 25% – in lieu of accruing the entitlements that their permanent full-time or part-time colleagues receive.
When a casual employee converts to permanent employment, it can be unclear exactly how the employee’s previous casual service impacts on the entitlements the employee is now able to access.
Casual employees who have at least 6 months of service (or 12 months’ service for a small business) can notify their employer that they want to convert to full-time or part-time employment under the National Employment Standards (NES). An employer receiving a notification under the NES must respond to the notification within 21 days and can only refuse the notification on limited grounds.
While modern awards typically provide the same entitlements as the NES, enterprise agreements or contract can provide other ways for employees to convert. Employers and employees can also agree to conversion to permanent employment outside of any formal mechanism.
Whether an employee’s service counts towards entitlements that accrue will often depend on whether the employee was a regular casual employee.
A casual employee is considered ‘regular’ under the Fair Work Act 2009 if they have been employed on a ‘regular and systematic basis’. The Fair Work Commission has stated that regular should be treated liberally and is intended to mean repetitive, rather than unform or constant.
This means that a casual employee who is consistently given work is capable of being a regular casual employee even if their hours of work fluctuate, or there are weeks where they did not work at all.
Notice of termination and redundancy pay under the NES both accumulate based on an employee’s years of continuous service. However, whether an employee’s casual service counted towards these entitlements was a source of ambiguity for several years. Multiple cases on the subject reached inconsistent outcomes based on the circumstances of the case, leaving employers unclear on how to proceed.
Fortunately, this issue was resolved in 2021 when the NES were amended to explicitly state that casual service does not count towards either notice of termination or redundancy pay. This means that an employee will only start to accumulate years of service for these entitlements once they convert from casual employment to permanent employment.
Casual employees are excluded from accruing annual leave and personal/carer’s leave under the NES. However, once a casual employee converts to permanent employment, they will start accruing annual leave and personal/carer’s leave progressively from that point onwards.
Legislation providing long service leave in each state and territory allows casual employees to accrue leave. This means that an employee’s conversion to permanent employment will generally not impact their eligibility to receive long service leave.
A small number of employees receive long service leave under preserved pre-modern award terms. For these employees, the entitlement to long service leave will depend on the terms of the pre-modern award.
Due to the complexity of dealing with different multiple long service leave schemes across multiple jurisdictions, Australian Industry Group publishes a Long Service Leave Handbook to assist businesses.
Sometimes employers wish to place an employee on a new probation period when they convert to permanent employment.
Before an employee can make an unfair dismissal claim, they must serve a minimum employment period of either 6 or 12 months, depending on whether the employer is a small business. Crucially, the Fair Work Act 2009 states that service as a regular casual employee counts towards this period.
The minimum employment period is defined by the Fair Work Act 2009, and cannot be extended or modified by contract or agreement with the employee.
This means that it just as important for employers to manage performance and conduct of casual employees during the first 6-12 months of casual service as for permanent employees. Not only are there no do-overs for that initial probationary period, but the failure to deal with performance and conduct issues might not be a sufficient operational reason to refuse a casual conversion notification later.
Parental leave and requests for flexible working arrangements under the NES require an employee to have 12 months of service before they can access these entitlements, either as a permanent employee or as a regular casual employee.
The 10 annual days of paid family and domestic violence leave is unusual in how it accrues and is used under the NES.
Instead of accruing progressively like most forms of leave, the full 10 days of family and domestic violence are granted to employees in full when they first start employment, and the 10 days are refreshed on the employee’s work anniversary each 12 months.
Whether the employee is casual or permanent does not change their work anniversary, meaning casual conversion has little practical effect on an employee’s family and domestic violence leave entitlement.
Australian Industry Group's National Employment Standards Handbook provides helpful and practical information on all the National Employment Standard (NES) entitlements (such as community services leave and personal/carer's leave) and how to successfully manage them.
The handbook includes includes guidance on the interaction of the NES with industrial instruments and common award clauses, case examples, notice and documentary requirements, information on transfer of business and record keeping obligations and much more.
The accompanying updating subscription for this publication makes sure you stay up to date when legislative changes or case law developments occur.
The NES apply to every employee so don't wait, order your copy now and be confident in applying the NES in your workplace!
All these entitlements starting to accrue sound like new expenses for the business, but there is a fine balance at work. The 25% casual loading was determined by the predecessor to the Fair Work Commission to closely align to the value of the entitlements that employees forgo as casual employees.
For many casual employees, the higher pay rate for being a casual employee is more attractive than converting to permanent employment. For others, the prospect of security of permanent employment is worth the reduction in take-home pay.
Employee entitlements can be complex. Members of Australian Industry Group can contact us or call our Workplace Advice Line on 1300 55 66 77 for further information.
Take advantage of more than 150 years of experience actively solving Members’ workplace issues and representing their interests at the highest levels of national and state government. Being a Member of Australian Industry Group makes good business sense. Call us on 1300 55 66 77 or visit our Why join page to sign up for a consultation with one of our member representatives.
