12-Month Fixed-Term Contract: What You Need To Know

Hiring someone on a one-year contract can be a practical way to cover a project, parental leave or a defined busy period. A 12‑month fixed‑term arrangement gives both sides clarity around expectations, timing and cost.

But the rules around fixed‑term employment in Australia have changed in recent years, and there are traps if you “roll” short contracts over and over or use the wrong kind of clause. The good news is, with the right setup, a 12‑month fixed‑term contract can still be perfectly lawful and very effective.

In this guide, we’ll walk through what a 12‑month fixed‑term contract is, when you can use one, what to include, and how to manage the end of the term so you stay compliant and protect your business.

What Is A 12‑Month Fixed‑Term Contract?

A fixed‑term contract is an employment agreement that ends on a set date. A 12‑month fixed‑term contract ends after one year from the start date, unless it’s terminated earlier in line with the contract (if early termination is allowed).

It’s different from an ongoing (permanent) contract, which has no end date, and different again from a “maximum term” contract, which looks similar to permanent employment but allows termination on notice at any time up to a fixed end date. If you are considering the “maximum term” model, make sure you understand how maximum term contracts work and how they interact with awards and unfair dismissal rules.

Fixed‑term roles are usually full‑time or part‑time. Casuals are generally engaged on an as‑needed basis, so they’re less commonly used on fixed end dates.

Is A 12‑Month Fixed‑Term Contract Allowed In Australia?

Yes. Under the Fair Work Act, fixed‑term contracts are still lawful - including 12‑month terms - provided you comply with the newer limits on extended or repeated use of fixed terms and you give employees the required information statements.

The Two Key Rules To Note

• Duration cap and extensions: In most cases, you cannot employ someone on fixed terms that run longer than two years in total (including extensions), and you can’t extend a fixed‑term contract more than once. A single 12‑month fixed‑term contract sits comfortably within these limits, but “rolling” multiple one‑year contracts can quickly breach them.
• Consecutive contracts: If you re‑engage the same person on another fixed‑term contract to do substantially the same work with your business, the law can treat these as consecutive. That means the two‑year cap and “one extension” rule can catch you even if each individual contract is only 6 or 12 months.

Important Exceptions Exist - But They’re Narrow

There are specific, limited exceptions in the Fair Work Act and regulations (for example, certain training arrangements or roles that are tied to genuinely time‑limited external funding). If you think an exception might apply, it’s best to get tailored legal advice before you rely on it.

Give The Right Information Statement

When you engage someone on a fixed‑term contract, you must provide the Fair Work Ombudsman’s Fixed Term Contract Information Statement as well as the general Fair Work Information Statement. These can be given electronically.

Award And Enterprise Agreement Overlay

Modern awards or an enterprise agreement may impose further limits or rules about fixed‑term employment in your industry. It’s important to check coverage and classification, or get help with Modern Awards to ensure your contract and work arrangements align with minimum entitlements.

What Should A 12‑Month Fixed‑Term Contract Include?

A clear, well‑drafted contract sets expectations, reduces disputes and keeps you compliant. At a minimum, build in the following:

1) Position, Duties And Location

Describe the role, reporting line and primary duties. Add a reasonable “other duties” clause and note the location (including any hybrid or remote expectations).

2) Start Date And End Date

State the commencement date and the exact end date (or a description like “12 months from commencement”). Make it clear that the employment ends automatically on that date, without further notice.

3) Early Termination (If You Intend To Allow It)

Fixed‑term roles often end on the end date with no right to terminate early. If you want the ability to end the contract earlier, include a termination on notice clause, and ensure the notice period meets minimum standards. If you end employment by giving notice instead of letting the term expire, consider whether you’ll need to provide payment in lieu of notice.

4) Hours, Rostering And Overtime

Set ordinary hours, rostering practices and overtime rules, consistent with any applicable award. Also recognise the National Employment Standards (NES) on maximum weekly hours for full‑time and part‑time staff.

5) Pay, Allowances And Set‑Offs

Specify the base rate, pay cycle and any allowances or loadings. If you pay an “all‑in” salary, your contract should include carefully drafted set‑off clauses and a reconciliation process to avoid underpayments under the award.

6) Leave Entitlements

Confirm paid annual leave, personal/carer’s leave and public holiday entitlements in line with the NES and the relevant award. If the employee will be part‑time, think about accrual and pro‑rating and make sure your payroll settings line up with annual leave entitlements.

7) Confidentiality, IP And Restraints

Protect your confidential information, make sure intellectual property created in the course of employment is assigned to the business, and consider a proportionate restraint (non‑solicit or non‑deal) post‑employment if it’s reasonably necessary to protect legitimate business interests.

8) Workplace Policies

Reference your policies (e.g. code of conduct, WHS, IT and social media) and make it clear they can be updated. Policies should support - not contradict - the contract.

9) Renewal Or Conversion

If there’s a possibility of continuing employment after 12 months, avoid language that guarantees renewal, and be mindful of the two‑year cap and one‑extension limit. If conversion to ongoing employment is on the cards, outline a simple process for offering and accepting a new Employment Contract.

What Entitlements Apply During A 12‑Month Term?

Fixed‑term employees covered by the NES generally receive the same minimum entitlements as ongoing employees for the life of the contract (other than redundancy at the end of a lawful fixed term):

• Annual Leave: Full‑time employees accrue four weeks per year of service (pro‑rata for part‑time). Leave accrues progressively and is paid out on termination if unused, unless an award or agreement changes payout rules.
• Personal/Carer’s Leave: Accrues at 10 days per year of service for full‑time staff (pro‑rata for part‑time). Unused paid personal leave is not typically paid out at the end of employment.
• Public Holidays: If the employee would ordinarily work on a public holiday, they’re entitled to be absent without loss of pay, subject to reasonable requests to work.
• Long Service Leave: State and territory laws apply. In some jurisdictions, long service leave can accrue even on a fixed‑term contract, depending on length of service and continuity.
• Superannuation: You must pay super at the legislated rate on ordinary time earnings.
• Breaks And Overtime: Follow the award or agreement for meal and rest breaks, penalty rates and overtime thresholds, alongside the NES limit on maximum weekly hours.

Is There Redundancy Pay At The End Of A Fixed Term?

Where a fixed‑term contract simply ends on its agreed end date, that’s not a redundancy and redundancy pay is generally not required. If you end the employment before the end date because the role is no longer required, redundancy obligations may apply (subject to small business exemptions and length of service).

What About Probation?

Probation can be used in a fixed‑term arrangement provided the period is reasonable for the role. A common approach is a 3-6 month probation inside the 12‑month term, with a shorter notice period during probation.

How To Manage The End Of The 12‑Month Contract

Clarity and notice are your friends here. Even though the contract ends automatically, good practice is to plan ahead and communicate early.

Option 1: Let The Contract End

If you’re not continuing the role, confirm in writing that the employment will finish on the end date. Provide any final pay, accrued leave payout (where applicable) and a separation certificate if requested.

Option 2: Renew Or Extend - Carefully

Renewing a fixed‑term contract requires caution because of the two‑year cap and one‑extension limit. If you’ve already used one extension, or if the total time across consecutive contracts would exceed two years, consider offering ongoing employment instead of another fixed term.

Option 3: Convert To Ongoing Employment

If the role is continuing, conversion to permanent employment is often the simplest path. Issue an updated Employment Contract on ongoing terms. Keep classification, pay, hours and accrued entitlements aligned with the applicable award or enterprise agreement.

Ending Early: What To Watch

If your contract allows termination on notice, you can end the employment earlier by giving the agreed notice (and meeting NES minimums). If you don’t want the employee to work out their notice, you may need to provide payment in lieu of notice.

If the contract does not include a right to terminate early, ending employment before the end date can amount to a breach of contract and expose you to damages, so draft this clause carefully at the start.

Common Risks With 12‑Month Fixed‑Term Contracts (And How To Avoid Them)

1) Rolling Fixed Terms That Breach The New Limits

Risk: Using a series of 12‑month contracts for the same person and work can cross the two‑year cap or exceed the “one extension” limit without you realising.

Tip: Track each individual’s contract history, plan workforce needs early, and if a role is ongoing, offer permanent employment rather than relying on continuous fixed terms.

2) Using The Wrong Contract Type

Risk: Confusing “fixed‑term” with “maximum term,” or vice versa, can have big consequences for termination rights and unfair dismissal exposure.

Tip: Choose the structure that actually matches how you’ll manage the role. If you need flexibility to terminate on notice before the end date, consider a maximum term model and ensure your clauses (including set‑off clauses if paying an all‑in salary) are properly drafted.

3) Award Non‑Compliance

Risk: Salary and clause structures that don’t match the underlying award obligations (classification, overtime, penalty rates, allowances) can lead to underpayments.

Tip: Confirm award coverage and classification at the outset and keep your contract, rosters and payroll aligned. If you’re unsure, get help with Modern Awards and award interpretation.

4) Missing The Information Statement

Risk: Forgetting to give the Fixed Term Contract Information Statement and the general Fair Work Information Statement is a compliance breach.

Tip: Build a simple onboarding checklist that includes both statements and ensure you can evidence delivery (email or HR system timestamp).

5) Poor End‑Of‑Term Communication

Risk: Ambiguity near the end date can lead to confusion, staff disengagement or even allegations of adverse treatment if notice feels abrupt.

Tip: Diary the end date months in advance, make a call early on whether the role will continue, and communicate clearly with the employee about next steps.

6) Overlooking Key Policies And IP

Risk: Without strong confidentiality, IP assignment and conduct expectations, you may struggle to protect your information and client relationships when the term ends.

Tip: Align your contract with your policies and ensure both are acknowledged during onboarding. If you work in a highly competitive space, consider proportionate post‑employment restraints.

Practical Steps To Set Up A 12‑Month Fixed‑Term Role

1. Define the business need: Is it a project, backfill or time‑limited initiative? Make sure a fixed term is appropriate.
2. Confirm award or agreement coverage: Lock in classification, minimum rates, penalties, allowances and breaks. Align rosters with NES and award rules on maximum weekly hours.
3. Choose the contract structure: Decide between fixed‑term or maximum‑term based on how much early‑termination flexibility you need. Avoid mixing models.
4. Draft the contract: Include start/end dates, hours, pay, leave, termination rights, confidentiality, IP and policies. If paying an all‑in salary, include compliant set‑off clauses.
5. Onboard properly: Collect tax and super details, provide both information statements, issue policies, and set up payroll and leave accruals correctly.
6. Plan the end of term: Diary the end date, decide on renewal or conversion early, and issue an updated Employment Contract if the role becomes ongoing.

Key Takeaways

• A 12‑month fixed‑term contract is lawful in Australia, but you must observe the two‑year cap on total fixed‑term duration and the rule against more than one extension.
• Provide the Fixed Term Contract Information Statement at onboarding, and ensure your arrangement aligns with any applicable modern award or enterprise agreement.
• Draft the contract carefully: set clear start/end dates, decide whether early termination is allowed, and include hours, pay, leave, confidentiality, IP and policy terms.
• Fixed‑term staff generally receive the same NES entitlements as ongoing staff during the term; redundancy pay isn’t typically payable when a lawful fixed term ends on its end date.
• Avoid risks like rolling fixed terms, award underpayments and unclear end‑of‑term communication by planning ahead and using robust documents.
• If a role is continuing beyond a year, consider conversion to ongoing employment rather than another fixed term to stay within the law’s limits.

If you’d like a consultation on preparing or reviewing a 12‑month fixed‑term Employment Contract, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.