How To Draft The Term Of An Employment Agreement In Australia

When you’re hiring, it’s easy to focus on the role itself: the hours, the pay, and when you need the person to start. But one of the most important parts of any contract is often the most misunderstood - the way you set the employment “term”.

The term affects what flexibility you have as your business changes, what happens if the relationship isn’t working, and what you may owe an employee if you need to end the arrangement. If you draft it well, it can help prevent disputes and give both sides clarity from day one.

In this guide, we’ll walk you through how to draft the term of an employment agreement in an Australian small business context, including practical options, clauses you should consider, and common pitfalls to avoid.

What Does “Term Of Employment Agreement” Mean (In Plain English)?

The term of an employment agreement is the period the contract is intended to run for, and the rules that apply to starting and ending the relationship. In practice, it answers questions like:

• Is the employee engaged permanently (ongoing)?
• Is it for a fixed period (e.g. 6 months or 12 months)?
• Is it tied to a project or a specific outcome?
• Does it include a probation period at the start?
• How can either party end the employment early?

Importantly, “term” doesn’t just mean the start and end date. It also includes the rules that apply during the employment - especially how and when the relationship can end.

For example, an ongoing employee might not have an “end date”, but the agreement still needs a clear term structure (commencement date, probation if any, and termination/notice rules).

Why Small Businesses Should Get The “Term” Right

For small businesses, hiring decisions are often made quickly and in response to growth, a new client, seasonal demand, or backfilling a role. The term is where you build in the right level of flexibility while staying compliant with Australian employment law.

If your term is unclear (or conflicts with your rostering, policies, or award obligations), it can create confusion about whether the person is permanent, casual, or on a fixed-term arrangement - and that can lead to claims about entitlements, notice, or unfair dismissal risks.

Choosing The Right Type Of Term For Your Business

Before you draft the term of an employment agreement, you need to decide what type of engagement makes sense operationally and legally.

Option 1: Ongoing (Permanent) Employment

This is the most common structure for full-time and part-time employees. There’s no fixed end date - the employment continues until either party ends it in accordance with the agreement and legal requirements.

For many small businesses, ongoing employment is a good fit when:

• the role is part of your core operations
• you expect the need to continue long-term
• you want stability and retention in the team

Even though it’s “ongoing”, the agreement should still clearly set out:

• the start date
• probation arrangements (if any)
• notice requirements and termination process

In most cases, you’ll capture these details in a tailored Employment Contract.

Option 2: Maximum Term / Fixed Term Employment

A fixed term arrangement is where the contract is intended to end on a particular date (or after a particular period). This can be useful where the work is genuinely time-limited - for example, covering parental leave, meeting a temporary peak in demand, or supporting a time-bound project.

However, fixed term arrangements need careful drafting. Since recent changes to the Fair Work Act introduced limits on fixed-term contracts (including restrictions on using back-to-back fixed-term contracts in many cases), it’s important to check whether a fixed term is permitted for your situation and how long it can run for.

When drafting a fixed term, be clear about:

• the end date (or end event)
• whether the contract can be ended early and how
• what happens at the end (automatic expiry vs renewal discussions)

It’s also important to align the term with your operational plan - because if the contract ends but you keep the employee working without a new agreement, you can unintentionally create an ongoing employment arrangement.

Option 3: Casual Employment (Where The “Term” Works Differently)

Casuals don’t typically have a fixed “term” in the sense of a guaranteed ongoing arrangement, but you still need to define how the engagement works - including how shifts are offered and how the relationship can end.

If you’re engaging casuals, ensure the contract and your rostering practices match. Notice issues are a common pain point, especially where regular patterns develop over time. Also keep in mind that many modern awards include specific rules about rostering, shift changes, minimum shift lengths and consultation - so your “flexibility” in practice may be limited by the applicable award or enterprise agreement.

If you’re building a process around shift changes and cancellations, it can help to set it out in a shift cancellation policy so your approach is consistent.

Step-By-Step: How To Draft The Term Of An Employment Agreement

If you want a practical drafting approach, here’s a structure we commonly recommend for small businesses.

Step 1: State The Commencement Date (And Any Pre-Employment Conditions)

Start with a simple sentence confirming when employment begins. If the start date is dependent on something (for example, right to work checks, a licence, or reference checks), make that clear.

Clarity here matters because the commencement date can affect:

• leave accruals and service-based entitlements
• probation timing
• notice calculations

Step 2: Define The Engagement Type

Explicitly state whether the employee is:

• full-time
• part-time
• casual
• fixed term / maximum term

This is a key part of the term of an employment agreement because each type comes with different minimum entitlements and different expectations about ongoing work.

Step 3: Add A Probation Period (If You Want One)

A probation period gives you an early window to assess performance and fit. You should draft it clearly so you can manage expectations and reduce misunderstandings.

In your term clause (or a probation clause closely linked to it), you can set out:

• how long probation lasts (e.g. 3 or 6 months)
• how performance will be assessed
• the notice required during probation (often shorter than post-probation, but it still needs to comply with the contract, the Fair Work Act, and any applicable award)

One common misunderstanding: probation is not the same as the “minimum employment period” for unfair dismissal eligibility (which is generally 6 months for most businesses, or 12 months for small business employers). Even during probation, employees may still have other rights and claims (for example under general protections/adverse action laws, discrimination laws, or award/contract underpayment rules), and you still need a fair and lawful process when ending employment.

Probation can also intersect with broader termination risk management. If you need guidance on what is typically considered best practice, this overview on termination during probation is a useful reference point when designing your process.

Step 4: If It’s Fixed Term, State The End Date (And The “End Event”)

If the employment is intended to end, don’t be vague. Spell it out.

Examples of clear drafting include:

• End date: “This agreement commences on 1 March 2026 and ends on 28 February 2027, unless terminated earlier in accordance with this agreement.”
• End event (project-based): “This agreement ends on completion of , being when , unless terminated earlier…”

Be careful with end events: if the event is unclear or subjective, it can create disputes about whether the agreement really ended.

Step 5: Include Termination And Notice Rules

This is where the term provisions become “real” in practice.

At a minimum, set out:

• how much notice the employer must give
• how much notice the employee must give
• whether you can make payment in lieu of notice
• what happens in cases of serious misconduct

Many businesses also choose to include the option of payment in lieu of notice, because it gives you flexibility to end employment cleanly when needed (for example, where continuing work during the notice period isn’t practical).

Notice provisions should be consistent with the Fair Work Act 2009 (Cth), any applicable modern award or enterprise agreement, and the employee’s minimum entitlements. In practice, awards can also include extra rules that affect termination processes (for example, consultation requirements or industry-specific provisions), so it’s worth checking the applicable instrument rather than relying on a “one size fits all” notice clause.

Clauses To Include Around The Term (So Your Contract Matches Reality)

Drafting the term of an employment agreement isn’t only about dates. It’s also about the surrounding clauses that affect what happens over the life of the employment.

Hours Of Work And Rostering

Your term will sit alongside provisions about ordinary hours, additional hours, and how rosters are managed.

If you’re changing hours or rosters regularly (common in hospitality, retail, healthcare, and service businesses), try to ensure:

• the contract allows reasonable operational flexibility
• your rostering practices align with any award consultation, roster posting, shift change and minimum engagement requirements
• you don’t accidentally create “guaranteed” hours that you can’t deliver

Position, Duties, And Reporting Lines

Roles evolve quickly in small businesses. Consider drafting duties in a way that is accurate but flexible - for example, by listing core duties and allowing reasonable additional duties within the employee’s skill set.

This can prevent disputes later where the employee argues they were hired for one role but pushed into another without agreement.

Workplace Policies (And Making Them Enforceable)

Workplace policies don’t replace the employment agreement, but they do help you manage expectations consistently - especially as your team grows.

Your contract should ideally reference the key policies and make it clear employees must comply (without accidentally turning every policy into a contractual promise). Many businesses bundle this approach into a Workplace Policy framework that can be updated as the business changes.

Confidentiality And Intellectual Property

Even if the term is short (like a fixed-term contract), you should consider what happens to confidential information and any work product created during employment.

This is especially important if the employee will handle:

• customer lists
• pricing and supplier information
• marketing plans
• software, content, or design work

A well-drafted contract can ensure that confidential information is protected during and after the term.

Termination For Cause (Including Serious Misconduct)

Most small businesses want to know they can act quickly if there’s theft, violence, fraud, serious safety breaches, or other serious misconduct.

While the Fair Work framework still applies, your agreement should set out that serious misconduct may justify summary dismissal (termination without notice). The exact wording matters, and it should align with a fair and lawful process (including any award requirements that apply to discipline and termination).

Common Mistakes When Drafting The Term Of An Employment Agreement

Even good employers can run into problems if the written contract doesn’t match what’s happening in the business. Here are some of the most common mistakes we see.

1) Using A Fixed Term When You Actually Need Ongoing Employment

If the role is ongoing, it’s often better to use an ongoing contract with a probation period rather than repeatedly rolling short-term arrangements.

Fixed terms can be useful, but only where they genuinely fit the business need. Otherwise, you may create confusion and risk around whether the employee is truly fixed term or effectively permanent. You may also run into the Fair Work Act limits on fixed-term contracts, particularly if you’re considering renewals or consecutive fixed-term agreements.

2) Leaving Termination And Notice Too Vague

Clauses like “reasonable notice will be given” can create disputes, because “reasonable” is subjective.

Instead, clearly set out notice requirements and ensure they are at least the minimum required by law and meet any applicable modern award or enterprise agreement requirements (which can include industry-specific rules around notice, consultation, or the way rosters are managed during notice periods). If you’re unsure what should apply, it’s often best to get advice before you issue the contract.

3) Forgetting That Redundancy Is Different To Termination For Performance

Sometimes you need to end employment because the role is no longer needed - not because the employee did anything wrong.

That’s redundancy, and it comes with its own legal requirements. Even if your contract includes termination clauses, redundancy obligations can still apply depending on the circumstances, your business size, and the applicable award or enterprise agreement (including consultation obligations).

When you’re planning workforce changes, it can help to sanity-check likely entitlements using a redundancy calculator as an initial guide, before you make decisions about timing and process.

4) Not Keeping The Contract And Policies Aligned

Your term clause might say one thing, but your policies or day-to-day practices might say another.

For example:

• your contract says casual “as needed”, but you roster set hours every week
• your contract says one week’s notice during probation, but you terminate immediately without pay
• your policies promise benefits you’re not actually providing

This is why it’s worth treating the employment agreement as part of a broader system (contracts + policies + payroll + rostering).

Key Takeaways

• The term of an employment agreement is more than just dates - it’s the structure of the relationship, including commencement, probation (if used), and how the employment can end.
• Choosing the right term (ongoing, fixed term, or casual) should match how the role will actually operate in your business day-to-day.
• A clear termination and notice clause is essential for managing risk, avoiding disputes, and making sure you can act decisively when needed.
• Fixed-term agreements need careful drafting, especially given the Fair Work Act limits on fixed-term contracts, and around end dates, early termination rights, and what happens if the employee continues working after the end date.
• Probation is not the same thing as the minimum employment period for unfair dismissal eligibility - and termination during probation still needs to be handled lawfully and carefully.
• Your contract should align with your workplace policies, applicable award/enterprise agreement obligations, and operational practices, so there’s no mismatch between what’s written and what’s happening.
• Getting the term right upfront is usually far easier (and cheaper) than dealing with a termination or entitlements dispute later.

Disclaimer: This article is general information only and doesn’t constitute legal advice. For advice tailored to your business and the applicable award/enterprise agreement, get in touch with a lawyer.

If you’d like help drafting or reviewing the term of an employment agreement for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.