The government plans to introduce reforms to make it easier for casual workers to convert to permanent employment if they choose. What will these changes mean for HR?

The Australian government has unveiled plans to introduce industrial relations reforms that would offer more than 850,000 casual workers with regular hours a pathway to permanent employment. 

In a press release published last week, Workplace Relations Minister Tony Burke announced that a fresh definition of casual work will likely be introduced, empowering eligible workers to decide whether they wish to transition to permanent positions. 

According to Burke, the proposed amendments aim to address a legal “loophole” that enables certain employers to treat casual workers as if they were permanent employees, depriving them of essential job security and leave benefits.

The government plans to present these reforms to the parliament later this year as part of a broader suite of workplace relations measures to improve worker conditions and pay.

If passed, the reforms will prompt employers to consider how ‘casual’ their casual employees really are, says Will Snow, Employment and Safety Partner at Finlaysons.

“They’re seeking to reflect the reality that if you’re working regular hours, you should be able to become a permanent employee, and you should have those protections of a permanent employee, [such as] paid leave, notice of termination, redundancy pay and the certainty that you’re not going to lose your job next week because the hours go down,” he says.

“This sort of a change may well breathe new life into the rights of individual workers to choose certainty and security over that week’s pay packet.”

What issues are these changes trying to address?

The handling of casual employment has already shifted drastically in the last few years. One of the catalysts for this was a controversial series of court cases – Workpac v Rossato. 

In a 2020 case, the Federal Court found that a casual employee at Workpac, a labour hire company servicing the coal mining industry, was in fact permanent, due largely to his regular and predictable work hours, and therefore had a right to leave and other entitlements. However, once the ruling was passed down, Workpac sought leave to appeal to the High Court. 

In August 2021, the High Court overturned the Federal Court’s ruling and found that the employee was casual for the purposes of the Fair Work Act 2009 and Workpac’s enterprise agreement. The ruling clarified that a casual employee must have no firm advance commitment to ongoing work, and any commitment must be contained in an enforceable agreement. 

“This decision effectively said that, if you had a written contract which describes someone as casual and uses words like, ‘You agree that there’s no firm advance commitment,’ then that would be a very determinative factor in whether or not someone was casual,” says Snow.

“This sort of a change may well breathe new life into the rights of individual workers to choose certainty and security over that week’s pay packet.” – Will Snow, Employment and Safety Partner at Finlaysons

In light of these decisions, many businesses began carefully designing their casual contracts to include “magic words” like these which would automatically establish the employee as casual in the eyes of the courts, he says.

“What these proposed amendments would do, if passed, is simply say, ‘If you’re working regular hours, you should be able to elect to be able to become permanent, regardless of how careful the drafting of your particular contract may be,’” Snow explains.

“They want to make it more subject to the employee’s choice rather than the employer’s choice.”

Currently, under the Fair Work Act, employers are obliged to consider offering conversion from casual to permanent employment after 12 months of regular and systematic employment, or explain in writing why an offer to convert cannot be made on genuine business grounds.

Read HRM’s article on when employers must convert casual workers to permanent positions.

Although the full details of the bill have not yet been announced, Snow predicts that the changes will make it much harder for employers to push back on requests for casual conversion. The definition of ‘reasonable business grounds’ – which currently includes the expectation that the hours of work will significantly change or decrease – may also narrow.

However, it’s important to note that casual workers will have no obligation to convert to a permanent role if they don’t want to, regardless of how regular their hours are. While employers may see an increase in requests for casual conversion if these laws take effect, there are also many employees who are casual by choice and will not wish to convert, Snow says.

What challenges could this pose for employers?

While the proposed new legislation was welcomed by the Australian Council of Trade Unions, business groups such as the Australian Chamber of Commerce and Industry have argued that changing the definition of a casual worker is unnecessary and will reduce the flexibility of these workers.

According to Snow, one of the biggest concerns that businesses might have about the changes is the resourcing issues they could pose.

“The cost of labour is going to be similar – the Minister has said it’s not going to be an imposition on businesses, because you’ll be paying less per hour, but that will go towards people’s leave. 

“It will, however, be harder to manage short-term rostering and demand issues, and it may also affect overtime,” he says. 

“If I’m a permanent part-time employee working 20 hours per week, and I had to work 25 hours per week because of a spike in demand, then those five hours will most likely be [classified as] overtime and have significant penalty rates.”

To manage rostering issues, employers will need to budget for labour in advance rather than from pay period to pay period, he says. This is likely to be challenging for employers in industries that rely on casual labour, including hospitality, aged care and manufacturing.

Particularly for employers in these industries, it will be crucial to assess the organisation’s data on the usage of casual employment and the costs related to it in preparation for these changes.

“Think about your workforce requirements and the use of casuals, and understand that the flexibility which you might have built into those practices may not be available when these laws come into play,” he says.

“Again, many people won’t choose this – lots of people will say, ‘I’m not interested. I want to hang on to the money.’ But I would think that if [the employer has] less power to refuse, then more people will become permanent. 

“I’m certainly aware of a number of instances when people have wanted to become permanent and the employer has said ‘no’ on those ‘reasonable grounds’, and it will be interesting to see how those reasonable grounds might change.”

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