If you’re a business owner looking to hire new staff and need a bit of a refresher on casual vs permanent employment contracts, this article is for you.
Understanding the difference between casual and permanent employment can be confusing even for the most seasoned hiring professionals. It can be difficult to determine which employment type is best for your business and your employees. Furthermore, if you don’t allocate your employees’ employment classification properly, you can be faced with serious penalties such as breach of a modern award or underpaying staff.
This article outlines the key differences between casual and permanent employment to help you determine which engagement works best for both your employees and your business.
There are three primary types of employment:
- Permanent full-time;
- Permanent part-time; and
A permanent full-time employee, as the name suggests, has permanent ongoing employment working an average of 38 hours per week. An employee who is considered permanent part-time has permanent, ongoing employment but works less than 38 hours per week. In this class, employees have set hours and days each week. On the other hand, staff who are hired as casual employees are often more sporadic and their work may fluctuate from week to week depending on the needs of the employer. For this reason, casual employees aren’t guaranteed a minimum number of hours per week and are not paid for public holidays unless they are working these days.
Permanent employees have several entitlements, including:
- Paid annual leave
- Paid personal/carer’s/sick leave
- Unpaid paternal leave
- Long service leave
- Community service leave
- Paid family and domestic violence leave
- Holiday pay (even if they are absent on a public holiday)
- Paid notice upon termination
- Redundancy payment
- Request for flexible working arrangements
The National Employment Standards (NES) set out the minimum standards that apply to employees. Under this, both full-time and part-time permanent employees can receive the above-listed minimum entitlements. However, part-time employees receive a reduced fraction of minimum entitlements, such as sick leave, on a pro–rata basis or based on how many hours they work each week.
How casual employees are different to full-time or part-time employees
While permanent employees (full-time and part-time) have an advanced commitment to ongoing employment, casual employees have no guaranteed hours of work and no expectation of ongoing work in the future. Under The Fair Work Act 2009, a person is a casual employee of an employer if:
- An offer of employment made by the employer to the person is made on the understanding that there is no firm advance commitment to continuing and indefinite work, and;
- The person accepts the offer on that understanding and becomes an employee as a result of that acceptance.
Casual employees are not entitled to the same benefits as permanent employees. Under The National Employment Standards (NES), casual employees get:
- Access to a pathway to becoming a permanent employee
- 2 days unpaid carer’s leave per occasion
- 2 days compassionate leave per occasion
- Family and domestic violence leave
- Unpaid community service leave
Casual employees can request flexible working arrangements and take parental leave if they have been employed by their employer as a casual employee on a regular basis over 12 months and are expected to continue being employed by the employer on a regular basis.
Understanding Modern Awards
Each type of contract and employment type is mandated by Modern Awards, depending on the industry. A modern award is a document that sets out the minimum terms and conditions of employment on top of The National Employment Standards (NES).
Modern awards provide entitlements such as:
- Hours of work
- Penalty rates
Some employers and employees will not be covered by an award or registered agreement. When an employee is not covered by an award of agreement, they are considered to be award and agreement free. In these situations, the National Minimum Wage and the NES will form the minimum terms and conditions of employment.
If you’re a business owner, you have the responsibility for ensuring compliance with your Modern Award. Please refer to the following article to further your understanding of employee contracts – HR Basics for Small Business Owners.
Dismissing permanent and casual employees
In the case of dismissing or terminating a permanent employee’s contract, The Fair Work Act 2009 states that the employer provides a written notice of termination to the employee. This notice must be provided within a specified period of time, depending on how long they have been working for the employer. You can explore these timeframes in depth via The Fair Work Ombudsman. For example, if someone has been employed by an employer for less than a year, then they require only 1 week’s notice prior to dismissal.
Unlike casual employees, permanent full-time or part-time employees cannot be made redundant without notice. In the case of a casual employee, there is no notice requirement. However, casual employees may claim unfair dismissal if their employment is regular and systematic and if there is a reasonable expectation of ongoing employment.
Casual vs. Permanent staff – what’s best for your business?
The key distinction between casual and permanent employees is the ongoing expectation of regular and systematic working hours. Deciding on whether to hire someone on a permanent or casual basis depends entirely on your business, industry, and available resources.
Some factors to consider include:
- Whether you require seasonal staff (in which case, you could hire casual employees over the Christmas period)
- The profitability of your business and whether you need to keep your costs low while still starting out
- The nature of your work – for example those in hospitality largely employ staff on a casual basis
- Hours required and whether training will need to be provided
Regardless of whether you hire someone on a casual or permanent basis, it’s best practice to provide staff with an Employee Contract that clearly outlines the entitlements listed in the NES which includes the nature of employment, wage, legal entitlements, and modern awards.
The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact HR Connect for advice.