Term of Employment in Australia: What to Include in Contracts

Hiring your first (or fifth) team member is a big milestone. It’s also the point where many small businesses realise they’ve been relying on informal understandings - and that “we’ll figure it out as we go” can get risky fast.

One of the most important things to get right is the term of employment.

The term of employment is more than a start date and a finish date. It shapes how secure the role is, what ends the employment relationship, what notice is required, and what you can and can’t do if the arrangement needs to change.

This article is general information only and not legal advice. Employment obligations can vary depending on awards, enterprise agreements and your circumstances.

In this guide, we’ll break down what “term of employment” really means in Australia, the common types of employment terms used by small businesses, and what you should include in your employment contracts so your team (and your business) can operate with clarity.

What Does “Term Of Employment” Mean In Australia?

In plain English, the term of employment describes the duration of the employment relationship - including when it starts, whether it has an end date, and what events bring it to an end.

For small businesses, the term of employment matters because it affects:

• How and when you can end the employment relationship (and what process is required)
• Whether the role is ongoing or time-limited
• Notice periods (and whether you can use payment instead)
• How you manage performance issues (especially if the employee is on probation or engaged for a fixed period)
• Workforce planning (particularly if you hire for projects, seasonal peaks, or parental leave cover)

The term of employment should be clearly documented in your employment contract. If it isn’t, you can end up with misunderstandings about whether a role was “permanent”, how long it was intended to last, or what happens when work dries up.

Is “Term Of Employment” The Same As “Type Of Employment”?

They’re closely related, but not identical.

Type of employment typically refers to whether the employee is full-time, part-time, or casual.

Term of employment refers to whether the employment is ongoing (indefinite) or time-limited (for example, fixed term), and how it begins and ends.

For example, you can have:

• a full-time employee on an ongoing term (common for permanent hires)
• a part-time employee on a fixed term (common for a 6-month backfill role)
• a casual employee engaged without a guaranteed end date (common for hospitality, retail, and shift-based work)

Common Terms Of Employment: Ongoing, Fixed Term, Maximum Term And Casual

Australian small businesses usually use one (or a combination) of the following employment terms. The right approach depends on your operational needs, your industry, and your risk tolerance.

1. Ongoing (Indefinite) Employment

Ongoing employment (often called “permanent”) means there is no predetermined end date. Employment continues until one party ends it (for example, through resignation or termination).

This is common when you’re hiring someone to fill a continuing business need, like:

• a store manager
• an administrator
• a sales or customer support role
• an in-house specialist you expect to keep long term

When you’re using an ongoing term of employment, it’s important your contract clearly sets out:

• the employee’s start date
• the notice requirements for termination
• any probation arrangements
• the employee’s classification (full-time or part-time)

Many businesses document this in a tailored Employment Contract to reduce ambiguity and help manage issues early.

2. Fixed Term Employment

A fixed term contract has a defined end date (or ends at the completion of a particular period). For example, a 12-month contract from 1 February to 31 January.

Fixed term employment can be useful when you genuinely need someone for a set period, such as:

• covering an employee’s parental leave
• a short-term expansion or rollout
• a defined project with a clear end date
• seasonal peak periods (where you want certainty about end dates)

However, fixed term employment needs careful drafting and careful use. If the contract isn’t clear (or if it’s repeatedly renewed), a “fixed term” arrangement can start to look like ongoing employment in practice, which can create complications when you try to end it.

It’s also important to be mindful of current legal limits on fixed term contracts under the Fair Work Act. In many cases, you can’t use fixed term contracts to employ someone for longer than 2 years in total (including renewals), or extend/renew a fixed term contract more than once - unless an exception applies (for example, some roles covered by modern awards, high-income roles, specific time-limited tasks, emergency work, or certain types of leave cover).

3. Maximum Term Employment

Maximum term employment is commonly used where there is a nominated end date, but the contract also allows either party to end the employment earlier in accordance with the contract (for example, by giving notice).

This can be a helpful middle ground when:

• you have funding that may run out by a certain time
• you’re testing whether the workload will remain steady
• you’re hiring for a time-limited program but want flexibility to end earlier if needed

Because “maximum term” arrangements can be misunderstood, it’s important to use very clear language about:

• the maximum end date
• whether either party can terminate earlier
• the notice required
• what happens at the maximum end date (does employment end automatically?)

If you want the relationship to end cleanly at the end date, the contract needs to spell that out. If you want early termination rights, those also need to be expressly included.

4. Casual Employment (And The Reality Of “Ongoing Casual”)

Casual employment usually does not involve a guaranteed amount of work and is often engaged on a shift-by-shift basis. Many casual engagements are ongoing in the sense that there’s no end date - but the engagement remains casual.

For many small businesses, casuals are essential for flexibility. But casual engagement is also one of the most commonly misunderstood areas of employment law.

If you hire casual employees, your contract should be very clear about:

• the casual nature of employment (no guaranteed hours)
• how shifts are offered and accepted
• cancellation and change processes
• casual loading and pay rates

Putting the correct terms in writing is much easier when you start with a properly tailored Employment Contract for casual team members.

How The Term Of Employment Affects Ending Employment (Notice, Payment In Lieu And Risk)

The term of employment is closely linked to how the relationship ends - and this is where small businesses often get caught out.

Notice Periods: What Your Contract Should Say

For ongoing employment, termination often requires notice (unless there is serious misconduct, or another lawful basis for summary dismissal).

Your contract should specify:

• how much notice the employer must give
• how much notice the employee must give
• whether you can require the employee not to attend work during the notice period (for example, garden leave - if appropriate)
• how notice is calculated (calendar days vs weeks)

Even if your contract sets notice terms, you still need to ensure you meet minimum legal requirements (which can depend on the Fair Work Act, awards, and any applicable enterprise agreement).

Payment In Lieu Of Notice

Many business owners want the option to end employment quickly and pay out the notice instead. That’s often possible, but it should be reflected in your contract wording and handled carefully so final pay is calculated correctly.

As part of your termination clauses, it can be helpful to include a right to use payment in lieu of notice (where lawful), rather than trying to negotiate it under pressure after the decision is made.

Fixed Term Endings: Does The Contract End Automatically?

With a genuine fixed term, employment may end at the agreed end date. But it’s still important to manage the process well (and to check whether any early termination rights were included in the contract).

Practical tips include:

• diarise the end date early
• decide whether you want to offer a new contract (and if so, what term)
• avoid accidental “rollover” where the employee continues working without new paperwork (which can blur the original term)

If you’re unsure, it’s worth getting advice before the end date rather than after you’ve missed it.

What To Include In The Employment Contract’s “Term Of Employment” Clause

There’s no one-size-fits-all clause, but for most Australian small businesses, a strong “term of employment” section should deal with the key moving parts clearly.

Start Date (And If There Are Preconditions)

Your contract should specify the start date. If the start date depends on something (for example, background checks, proof of qualifications, or a right-to-work check), you should say so.

This can prevent situations where you’ve “hired” someone but critical steps weren’t completed before they started.

Employment Category: Full-Time, Part-Time Or Casual

Even though this is slightly different from “term”, it’s usually addressed in the same section or nearby.

You should clearly state whether the employee is:

• full-time
• part-time (and what the ordinary hours are)
• casual (and that there is no guarantee of ongoing work)

Ongoing Or Fixed Term (Including Any End Date)

Spell out whether the employment is ongoing or fixed term.

If it’s fixed term, include:

• the end date (or the event that ends employment)
• whether the contract ends automatically at the end date
• whether either party can terminate early and what notice applies

Probation (And What It Means In Practice)

Probation is not just a formality - it’s a useful period to confirm the role is a good fit on both sides.

A probation clause often covers:

• the probation length
• how performance will be reviewed
• whether different notice applies during probation (if lawful)

Even with probation in place, you should still manage performance fairly and document issues early. If you end employment, make sure you follow the contract and any legal obligations.

Termination And Notice Rules

Your term of employment clause should connect cleanly with your termination clause. As an employer, you generally want clarity on:

• minimum notice requirements
• how notice is given
• the employer’s ability to pay out notice
• summary dismissal language for serious misconduct (where appropriate)

Who The Contract Applies To (And Entire Agreement Wording)

Employment disputes often come down to “but you told me…” or “we agreed on…”.

While your contract can’t override the law, it can reduce confusion by clearly stating that it records the agreement and sets the key terms. This helps avoid accidental side deals or unclear promises about job security and duration.

Common Small Business Mistakes With Term Of Employment (And How To Avoid Them)

Most issues we see don’t come from bad intentions. They come from moving quickly, copying templates, or making assumptions about what’s “standard”.

Using A Fixed Term Contract For A Role That’s Actually Ongoing

If you need someone indefinitely, it may be better to use an ongoing contract (with probation and clear termination clauses) rather than trying to force a fixed end date.

Fixed term employment is best used where there is a genuine business reason the role ends on a certain date - and where the arrangement is permitted under the current Fair Work Act limits (including any applicable exceptions).

Not Matching The Contract To The Award Or Workplace Instruments

Your employment contract doesn’t exist in a vacuum. Depending on your industry and the role, a modern award may apply and set minimum conditions (including pay rates, penalties, allowances, and rostering requirements).

When the contract and the applicable award aren’t aligned, you risk underpayment issues and disputes.

Being Vague About Hours, Rosters, And Flexibility

Term of employment issues can flare up when expectations about hours don’t match reality.

For example:

• a “part-time” employee who regularly works full-time hours
• a casual employee who believes they have guaranteed shifts
• a fixed term employee who keeps being renewed and assumes permanency

Clear contract terms about ordinary hours, additional hours, and rostering processes are essential in avoiding that drift.

Ending Employment Without Following The Contract (Or The Law)

Even when the business decision is straightforward, execution matters. Notice, final pay, and process all need to be handled properly.

Where a quick exit is needed, the contract should support lawful payment in lieu pathways, rather than relying on ad hoc negotiations.

Other Clauses That Support The Term Of Employment (And Protect Your Business)

The term of employment is a core clause, but it works best when the rest of your contract and policies back it up.

Position And Duties

Clearly describing the role helps manage performance and expectations during probation and beyond. It also reduces the risk of disputes when you need the employee to take on reasonable related tasks as your business changes.

Confidentiality And IP Ownership

If your employee creates content, designs, processes, code, marketing assets, or internal documents as part of their role, you’ll usually want the contract to address who owns that intellectual property.

This is particularly important for small businesses building systems and brand assets early.

Workplace Policies (And Consistency)

Your contract should align with your workplace policies on things like conduct, leave requests, device use, and workplace surveillance (where relevant).

If you use workplace cameras, for example, you’ll want your employment arrangements to be consistent with workplace camera laws and any privacy obligations that apply.

Privacy And Employee Records

Small businesses often focus on customer privacy, but employee information also needs to be handled carefully.

If you collect and store personal information (for employees or candidates), it’s worth having a clear internal approach to privacy compliance and documentation, including a suitable Privacy Policy where appropriate for your business.

When You Need More Than An Employment Contract

If you’re hiring senior staff, expanding quickly, or bringing on contractors as well as employees, you may also need supporting documents and advice to keep everything consistent (for example, contractor agreements, incentive plans, or tailored termination documents).

Getting the foundations right early often saves time and cost later.

Key Takeaways

• The term of employment sets out how long the employment relationship lasts, including the start date, whether there’s an end date, and what brings employment to an end.
• Small businesses commonly use ongoing employment, fixed term employment, maximum term arrangements, and casual employment - and each has different risks and drafting needs.
• Your employment contract should clearly address the term of employment, probation, termination rights, notice requirements, and whether payment in lieu of notice can be used.
• Misaligned expectations (especially around hours, renewals, and “casual but ongoing” work) are a major source of disputes, so clarity in writing is essential.
• Strong contracts work best when supported by consistent workplace policies, confidentiality/IP terms, and practical HR processes.

If you’d like help putting the right term of employment clauses in place (or updating your employment contracts as your team grows), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.